Preamble

The House met at half-past Two o'clock

PRAYERS

[MADAM SPEAKER in the Chair]

Oral Answers to Questions — TREASURY

The Chancellor of the Exchequer was asked—

Asian Economies (IMF Rescue Plans)

Mr. Corbyn: What British involvement there is in the International Monetary Fund rescue plans for the south-east Asian economies; and if he will make a statement. [27201]

The Chancellor of the Exchequer (Mr. Gordon Brown): Since last summer, four Asian countries have agreed International Monetary Fund programmes under the IMF' s emergency financing mechanism, all with United Kingdom support. They are the Philippines, Thailand, Indonesia and Korea. Britain is also one of 13 bilateral contributors to Korea, with a potential contribution of $1.25 billion; no contribution has yet been disbursed. Help is also being given through the Asian Development bank and the World bank.

Mr. Corbyn: I am sure that the Chancellor of the Exchequer is aware of the terrible consequences for the poorest people in that region of last year's collapse of the financial institutions, of the terrifying poverty that many people there are facing and of the expulsion of many migrant workers. Malaysia, for example, is expelling almost 1 million people, and 20 million people in Indonesia are trying to survive on less than $1 a day. Will he assure the House that, in all the considerations of the IMF package, there will be an attempt to stop countries throwing migrant workers out, into even greater poverty in the countries that they have come from, and that the money will be used to support the poorest people in every one of those countries—rather than to bail out the financial institutions that got those countries into a mess in the first place, often decamping with large profits to safer havens elsewhere?

Mr. Brown: I can tell my hon. Friend two things. First, we are concerned about the social difficulties that have been caused by the problems in those countries. It is important that there is openness in the fiscal policies pursued by those countries. I am glad to say that some of the expensive programmes being pursued by some of the Governments have been cancelled. Secondly, we are following action in the area by the World bank, which is disbursing $16 billion. I shall meet the World bank governor soon to discuss those

issues. We are as concerned as he is that the social difficulties caused by the rescue programmes are minimised as much as possible.

Trades Union Congress

Mr. Lilley: Does the Chancellor of the Exchequer agree with his friends in the Trades Union Congress that unemployment will start to rise before the end of this year, and that that has little to do with the crisis in Asia but is primarily to do with his policies of high interest rates, an excessive exchange rate and over-tight fiscal policy? Will he give the House an assurance that he will not further tighten taxation policies in the Budget?

Mr. Brown: The right hon. Gentleman is stretching his question far beyond the issue of what the Government are doing on the IMF. However, I shall answer him directly. He is saying, first, that fiscal policy is too tight. A few months ago, he was saying that it was too lax. The Conservative party had better make up its mind where it stands on the issues. Is it in favour of lower interest rates, the same interest rates or higher interest rates? Is it in favour of higher public spending or lower public spending? The Conservative party really must make up its mind on those issues.

Dr. Palmer: Is the Chancellor aware of the widespread concern that the IMF, the World bank and, in future, the multilateral agreement on investment will be giving advice to developing countries that is more in the interests of the multilateral companies that might wish to invest in those countries than in the interests of the countries themselves? Will he use his influence to support the new direction, which we begin to see in the World bank, of considering not only openness to world financial markets but the social impact of changes?

Mr. Brown: Yes, on the last point, we shall follow the social reform policies that are being examined by the World bank. Three issues arise from what has been happening in the Asian countries. First, there is a desperate need for banking reform in those countries to avoid the exposures that caused so many problems in the past few months. Secondly, there is a desperate need for openness in monetary and fiscal policy so that people know exactly where they stand. Some of the recent events could have been avoided had the IMF adopted a code of monetary and fiscal policy, as we have suggested. Thirdly, the IMF will have to look at its own practices and the lessons to be learnt. The G7 and the meeting of the Association of South-East Asian Nations in London will provide a chance to examine all the issues. The lessons will have to be learnt.

Tax Harmonisation

Mr. Waterson: What discussions he has had with his EU counterparts on tax harmonisation. [27202]

The Chief Secretary to the Treasury (Mr. Alistair Darling): There have been preliminary discussions in ECOFIN about aspects of tax harmonisation. The Government's view is that direct taxation is primarily a matter for national Governments. Decisions on European


tax issues are subject to unanimity. The Government would not agree to measures unless they were in the United Kingdom's interests.

Mr. Waterson: Will the right hon. Gentleman confirm that one of the topics for discussion at those meetings is measures to combat tax avoidance? Will he also confirm that the Belgian tax authorities are participating in the discussions and that he has been drawing on the undoubted and unparalleled experience of the Paymaster General in those matters?

Mr. Darling: If the hon. Gentleman were genuinely interested in the subject matter, he would realise that the discussions were in respect of tax harmonisation measures that will benefit British businesses. That is a matter to which the Government attach great importance and which was neglected by the previous Government.

Mr. Frank Cook: In the course of the discussions, will my right hon. Friend discuss with his European counterparts who have an interest in the North sea oil and gas industries the seriousness of the higher operating costs, the diminishing capacity of the fields and the need for further investment, with a view to ensuring that the industry does not suffer any adverse effects of tax changes?

Mr. Darling: I am not sure whether the discussions to which I referred will have a direct bearing on the matters that my hon. Friend raises but, as he knows, the North sea oil industry is of immense importance to the United Kingdom, particularly the north-east of England and the north-east of Scotland. The ECOFIN discussions are geared primarily at establishing a code of conduct on business taxation so that Britain and British businesses are not exposed to unfair competition by action in other parts of Europe.

Mr. Trimble: Without arguing for uniform tax rates, will the Minister bear in mind the distorting effect of wide differences between tax rates on businesses and the economy? I am thinking in particular of the tremendous difference between corporation tax rates in the United Kingdom and the Republic of Ireland which puts various parts of the United Kingdom at a serious disadvantage in terms of attracting inward investment.

Mr. Darling: As the right hon. Gentleman knows, in the Budget and in the pre-Budget report, my right hon. Friend the Chancellor of the Exchequer announced a major reduction in corporation tax, which will be beneficial to the United Kingdom. That is an example of the fair competition that we want to enhance. The code of conduct is geared to stopping unfair competition, whereby member states may be tempted to shelter some niche market in an unfair way. However, I am sure that the right hon. Gentleman will agree that the measures announced by my right hon. Friend last year, which mean that we have one of the lowest corporation tax rates of any of our major competitors anywhere in the world, will be immensely beneficial to the United Kingdom, in respect of investment from here and inward investment.

Windfall Levy

Mr. Pond: If he will make a statement on his expenditure plans for the windfall levy. [27203]

Ms Julie Morgan: What proposals he has to use the revenues accruing from the windfall tax. [27220]

Mr. Gordon Brown: The receipts of the windfall tax are being used to provide new work and training opportunities for young people, the long-term unemployed, lone parents and people who are sick and disabled and who want the right to work. We are also providing £1.2 billion of capital projects for schools and contributing to the development of a national child care strategy. I can tell the House that £2.6 billion has already been paid by the utilities.

Mr. Pond: I thank my right hon. Friend for that reply and I can assure him that, in Gravesham, the Employment Service is working very effectively with local businesses and organisations to make sure that the new deal is a success and that the money is well spent. Will he consider measures that may assist in giving hope and opportunity to another group—the older unemployed, who were written off by the previous Government but want to use their skills and ability?

Mr. Brown: Yes, indeed; my hon. Friend is right. We inherited a situation in which nearly 400,000 adult men and women had been unemployed for more than a year and nearly 250,000 had been unemployed for more than two years. Whereas the long-term unemployed make up only 10 per cent. of the unemployed in the United States, they make up nearly 40 per cent. in Britain. That is why, in addition to giving every young person the chance of a job or training from April in our nationwide strategy for the new deal, from July we shall be offering the £75-a-week subsidy to employers to take on men and women who have been unemployed for more than two years. We shall also announce soon other measures to help the long-term unemployed. I believe that that is right, for both adults and the young.

Ms Morgan: I welcome the £300 million that is to be spent on child care, which represents the first peacetime Government commitment to a comprehensive child care policy. Will my right hon. Friend consider using receipts from the windfall levy to fund pre-school provision as well, as lack of access to that is emerging as one of the barriers for mothers who want to work?

Mr. Brown: My hon. Friend is absolutely right. One of the scandals that we inherited was the absence of a national child care strategy. There are three elements to our strategy. First, we must make child care accessible, which is why the windfall tax, along with funds from the new opportunities lottery fund, is contributing to an increase in the number of child care places. We believe that there can be 30,000 after-school clubs and a million places after five years, and we are considering other ways in which to increase the number of places.
Secondly, the windfall tax is also contributing to the training of child carers. We believe that, over time, 50,000 new child carers can be trained partly using moneys from the windfall levy—about £100 million. Thirdly, in making


child care more accessible, we are examining the child care disregard. We have already dedicated £50 million from the windfall tax towards improving child care disregard, so that people can afford child care. We know that we shall have to do more, and we shall do more.

Mr. Forth: Can the Chancellor confirm that, along with the windfall tax, one of the main sources of revenue for the Government's programmes is the closing of tax loopholes? What moral and policy lead are he and other Treasury Ministers giving in that matter?

Mr. Brown: In my first Budget, I closed loopholes worth £1.5 billion—loopholes that the Tories had failed to close in 18 years. I have also said that we are examining all loopholes with a view to closing them. The difference between us and the Conservatives is that they talk about the matter, whereas we take action.

Mr. Ruffley: Given that the Government allege that the welfare-to-work scheme will, in the medium term, save the British taxpayer money, can the Chancellor tell us in what year he expects the savings from the scheme to exceed its costs?

Mr. Brown: The money that we have allocated through the windfall fund is £4 billion—£3 billion for the youth employment programme and another £1 billion to help lone parents, the disabled and the long-term unemployed. As people get back to work, there will be a reduction in the cost of social security benefits; as the programme works, that will happen. We believe that we shall then be able to redirect resources to education—another priority.

Young People

Gillian Merron: What his economic priorities are for the enhancement of opportunities for young people during the British presidency. [27204]

Mr. Gordon Brown: I shall be using the United Kingdom presidency of the European Union to advocate policies that ensure that all young people throughout the Community—5 million of whom are unemployed—are equipped with the skills that they need and given the job opportunities that they want. At the Cardiff summit, we shall consider action plans from each Government.

Gillian Merron: I thank my right hon. Friend for his reply, which shows that, if Britain takes a lead and the European Union countries follow, we shall at last ensure that the EU tackles the youth unemployment challenges that lie ahead. [Interruption.] Does he agree that the welfare-to-work programmes, such as the ones to which he has referred, must feature high-quality training, so that they can benefit the 272 unemployed people under 25 in my constituency of Lincoln and the other unemployed young people in the European Union?

Mr. Brown: I agree entirely, and it is interesting that, when my hon. Friend mentioned the problems of youth unemployment in her area, Conservative Members sneered at what she is doing. Every hon. Member should consider himself an ambassador for the new deal. It is the

opportunity to end the social divisions that have characterised this country as regards youth employment. Most sensible people want that programme to succeed.

Mr. Blunt: Is the Chancellor aware that a number of young people in my constituency work in the duty-free trade, which is due to be abolished in 1999? They cannot understand why that trade should be abolished when duty rates throughout the European Union remain wildly divergent and there is not a single market in those goods.

Mr. Brown: I wonder whether the hon. Gentleman was told when he arrived in this place that the previous Government agreed to the abolition of duty free. We are now having to deal with the consequences and are considering those matters.

Mr. Derek Foster: I commend my right hon. Friend for the tremendous political drive that he has put behind the new deal for young people, which should prove an excellent model for our European partners. On flexible labour markets, does he agree that those have nothing to do with macho management, hire and fire and screwing down the wages and working conditions of the work force, and everything to do with superb management, recognising the unique contribution that labour has to make to productivity and the quality of the product and proper investment in training and development of staff?

Mr. Brown: I applaud the efforts of my right hon. Friend as Chairman of the Employment Sub-Committee of the Select Committee on Education and Employment and the work that he and his colleagues have done on those issues. He is right. The key to our future is: first, giving young people opportunities; secondly, as he rightly said, giving them the skills, both right across the board and for five to seven-year-olds, as our education announcement today begins to do; and thirdly, management working with the work force to ensure that we have a prosperous economy. Those are the ways forward for our economy.

Dr. Cable: Does the Chancellor accept that the Government's commitment to young people is weakened by the effect of today's announcement on class sizes, which excluded half all local authorities, including mine in Richmond? Does he also accept that the state of public finances is now sufficiently secure that he could afford to relax immediately the capping restrictions to allow local authorities to invest in education and reduce class sizes?

Mr. Brown: I thought that the hon. Gentleman would want to applaud the investment of £22 million, which was taken from the assisted places scheme by the Government's decision to redistribute resources to help five and seven-year-olds, and the fact that we are making available capital investment—£1.2 billion from the windfall levy—for schools to be refurbished. At the last election, I seem to remember the Liberal Democrat party proposing a £500 million programme. We have produced a £1.2 billion programme and that is the difference between us and the Liberal Democrats. We take action; they just talk.

Mr. Hutton: I welcome the priority that the Government attach to tackling youth unemployment


during the United Kingdom presidency of the European Union. Will my right hon. Friend take this opportunity to congratulate Wesley Morgan, the first of my constituents to benefit from a new job under the new deal, and his employers Cumbria Specialist Coaches? Is not the new deal good news for business and a great deal for the long-term unemployed?

Mr. Brown: I am grateful to my hon. Friend for mentioning one of the many people who have benefited from the new deal. I congratulate him and other hon. Members who have involved themselves directly in that programme. In the past four weeks, 8,000 young people in the 12 pilot areas have been interviewed, with new deal offers of jobs and training. Already, 4,000 have been matched up with jobs and that is a considerable achievement. I look forward, as does the House, I believe, to that programme becoming nationwide, and applying to every constituency.

Lawyers' Fees

Mr. Llwyd: How many representations he has received on the proposed changes in the taxation of lawyers' fees; and if he will make a statement. [27205]

Mr. Gordon Brown: The Inland Revenue press release issued on 22 December invited comments on the proposals to withdraw the cash basis practices available to professional businesses, not just to lawyers. The Inland Revenue has not only received a large number of responses but has had a number of meetings with representative bodies, including the Law Society, the Bar Council and accountancy bodies. The consultation period ends on 14 February. Thereafter, we shall consider the various points made.

Mr. Llwyd: I am obliged to the Chancellor for that response. It seems grossly unfair to expect banisters to pay income tax on fees delivered when typically they will not be paid for several years—many years if they are dealing with Government Departments. Will the Chancellor consider the fact that, if the regressive step that he is considering is adopted, it will be impossible for newcomers to gain entry to the profession? We shall inevitably go back to the old days, when only the well-heeled could enter the legal profession.

Mr. Brown: I understand the hon. Gentleman's comments. Our sensitivity to the needs of young lawyers entering the profession is clear from the responses that we have had and the indications that we have already given that we shall take the issue seriously. We are in a period of consultation about implementation.
The Government pay out £1.7 billion a year in legal fees. Some 80 per cent. of civil legal aid and 90 per cent. of criminal legal aid is paid within the year. The new proposals will allow a period during which they can be implemented with the sensitivity that I am talking about.

Mr. Gibb: Does not the Chancellor's answer show that the proposal was ill thought through? Is that not symptomatic of the Government's taxation policies? We have had an ill-thought-through decision to abolish advance corporation tax on dividend tax credits, leading to the wholesale change of the corporation tax system, an

ill-thought-through proposal on quarterly corporation tax payments and an ill-thought-through proposal to abolish PEPs and TESSAs.

Mr. Brown: The proposal is that those in professional bodies should be taxed in the same way as everybody else. The hon. Gentleman should applaud the modernisation of the tax system. He should also congratulate us on reducing corporation tax from 33p to 31p, with a further proposal to reduce it to 30p—the lowest corporation tax rate in the industrialised world.

Pensions Mis-selling

Ms Moran: If he will make a statement on the progress of the Economic Secretary's discussions in respect of mis-selling of pensions. [27206]

Mr. Darling: Today, I have placed in the Library a table showing what progress has been made by the companies that we have been monitoring up to the end of January. It shows that they have made further progress. About 60 per cent. of the cases requiring review have been reviewed—which would never have happened but for the action taken by my hon. Friend the Economic Secretary.

Ms Moran: I warmly welcome the progress that my right hon. Friend has just described. Is he aware that, in some companies, the problem remains of temporary, untrained staff pyramid-selling pensions, which is the root cause of many of the mis-selling problems that we have had? Will he ensure that the views of responsible practitioners are taken on board so that the scandal of mis-selling, the legacy of which we inherited from the Conservatives, is not repeated?

Mr. Darling: My hon. Friend makes a good point. No one should doubt our intention that all the major pension companies, all the independent financial advisers and others who were involved should clear the problem up as quickly as possible. That is good for the industry and for the public. My hon. Friend may be interested to know that the Personal Investment Authority listens closely to what practitioners have to say, as will the Financial Services Authority, because such advice can be very helpful. The lessons to be learnt from the affair are that the old regulatory system was too lax, because self-regulation was incapable of ensuring high standards, and that clearing the matter up required firm Government action, which we have taken.

Mr. Heathcoat-Amory: The Chief Secretary will know that the Government report on the affairs of the Maxwell Group has not yet been published, but is awaited. Is he aware that the current edition of Business Age Magazine details how Robert Maxwell stole £450 million from pensioners in his companies and how the Paymaster General, who has not answered the question yet, made his fortune by buying and selling such companies to and from Robert Maxwell? The article describes how the transactions were carried out at non-commercial valuations. Should not any Minister of the Crown so implicated, subject to a possible investigation which the House is awaiting, resign?

Mr. Darling: It was entirely predictable that the shadow Chief Secretary would have nothing to say about


pensions mis-selling, which is what the question is about, because it was thanks to the Tory system of self-regulation that millions of people were cheated out of money—and the previous Government were prepared to do nothing about it.

Scottish Economy

Mr. Swinney: What analysis he has undertaken of the impact of the current level of interest rates on the Scottish economy. [27207]

Mr. Darling: Scottish business, as well as businesses in the whole of the United Kingdom, want stability and an end to boom and bust. Low inflation is an essential precondition for long-term sustainable growth.

Mr. Swinney: The Minister referred to boom and bust. Another Scottish company went bust this morning in the constituency of my hon. Friend the Member for Galloway and Upper Nithsdale (Mr. Morgan). Many Scottish companies, exporters, manufacturers and people in the agricultural industry are being crippled by the Government's interest rate policy. When will they deliver an interest rate policy that is appropriate to Scotland and not just to the south-east of England?

Mr. Darling: The hon. Gentleman belongs to a party that wants independence in Europe, which would mean Europewide interest rates, never mind just for the United Kingdom. The important point is that, unless we get stability and an end to the boom and bust that has so characterised the British economy, difficulties will continue to face businesses in Scotland and elsewhere. The Government are determined to get inflation out of the system and to create a stable platform on which businesses can build. Unless we take that long-term view, we shall return to the days—not so very long ago—of high inflation, which destroys businesses and badly affects mortgage payers and savers. We are not prepared to do that. We are taking the necessary action to ensure that the capacity of the economy expands and that there is a platform on which businesses and individuals can prosper.

Mr. Chisholm: Has my right hon. Friend analysed what effect the high borrowing policies of the Scottish National party would have on interest rates? Is not the best way to achieve sustainable low interest rates by the supply-side and European policies of the Government?

Mr. Darling: I am grateful to my hon. Friend for his support on those matters. He is right; it is not only a question of the nationalists' policy on taxation, spending and everything else. Nationalists will remember that their parliamentary leader, at the end of the last Parliament, said that an independent Scottish currency would shadow the pound sterling, which makes nonsense of the question asked by the hon. Member for North Tayside (Mr. Swinney). The Government are committed to economic stability and providing the stable platform that is essential if we are to break away from the cycle that has been so destructive in the past.

Mr. Green: Given that the Chief Secretary is speaking the day after Scottish unemployment started rising again,

he can congratulate himself on ending the boom phase of the boom and bust to which he objects. Does he agree with the TUC, which says that the main priority for the Government in the Budget should be to start a managed depreciation of sterling to help manufacturing industry in Scotland and elsewhere?

Mr. Darling: Stability is essential for the long-term good of this country. As the hon. Gentleman mentioned unemployment, I should point out that the Government's welfare-to-work programme is one of the many ways in which we can help give people who have been put out of work the skills and opportunities to get back into work. It is also a way of increasing the country's skills level because some parts of the country have low skills levels. The Government's overall strategy, which is long term, unlike that of the previous Government, is the key to getting the economic stability and expansion that we all want.

Mr. Blizzard: Will my right hon. Friend confirm that interest rates are not the only factor affecting the value of the pound, and that the current exchange rate against the deutschmark is not greatly different from the rate at which the previous Government thought fit to take Britain into the exchange rate mechanism, and from which the right hon. Member for Huntingdon (Mr. Major) said it would be fool's gold to devalue?

Mr. Darling: Of course, the exchange rate policy of the last Government has now been renounced by all those who took that decision. In contrast, our policy is to ensure that we have a low-inflation economy and conditions where we have a skilled and educated work force that will expand the capacity of our economy. Ours is a long-term policy designed to end the violent swings seen in the past, and ours is the only way to provide the stable platforms for businesses and individuals that everyone in the country wants.

Trusts (Taxation)

Mr. Gray: If he will make a statement on his policy towards the taxation of trusts. [27208]

Mr. Darling: We are committed to taking action to close any tax loopholes that may arise.

Mr. Gray: We are surprised that the Paymaster General has chosen not to answer that question, given his long and acknowledged expertise on the subject of trusts. Will the Chief Secretary comment on the article in Business Age Magazine this week, which is headed, "How Maxwell put his trust in Robinson" and states how the Paymaster General gave Mr. Maxwell particular advice with regard to losing his stolen billions? If that is ill informed and defamatory, as no doubt the Paymaster General believes it is, why is it that he has promised to sue The Sunday Times and The Observer for their ill-informed and defamatory remarks, but is not suing Business Age Magazine?

Mr. Darling: All I can say is that, unlike the Conservative party, we take action against tax loopholes. As my right hon. Friend the Chancellor has said, in the


last Budget, we closed £1.5 billion-worth of tax loopholes, whereas the last Government did absolutely nothing about it for 18 years.

Economic and Monetary Union

Mr. Wilkinson: If he will raise for discussion in ECOFIN the likely compliance by other countries in the EU with the Maastricht treaty conditions for entry into stage three of economic and monetary union. [27209]

Mr. Gordon Brown: In May this year, ECOFIN will assess, on the basis of reports by the Commission and the European Monetary Institute, whether each member state fulfils the necessary conditions for the adoption of the single currency. The Economic and Finance Ministers will then recommend their findings to the Council meeting in the form of the Heads of State or Government and decisions will then be made.

Mr. Wilkinson: Will the Chancellor of the Exchequer, as chairman of ECOFIN, recommend that all those countries which have the political aspiration to participate in the single currency should do so, in the interests of wider European unity; or will he insist that the strict stipulations of the treaty on European Union be met and thereby exclude Belgium and Italy, which have a level of national debt twice that permitted under the Maastricht treaty rules?

Mr. Brown: What we shall do is follow the procedures that have been laid down, which means that in March we shall receive reports from the Commission and the European Monetary Institute; those reports will then be discussed and a decision will be made on 1 May; and that will be reported to the European Parliament the next day for a final decision by the Council. We shall wait for the reports before making our recommendations and we shall chair the meetings in the orderly way that is required.

Mr. Sheldon: Is my right hon. Friend aware that, in any institution, it is the decisions taken in the first few months or year of that institution which determine much of what happens subsequently? Given that the decisions in question are so important and that we are out of many of them, how does he suggest we might reduce the problems of the danger to our economy?

Mr. Brown: We have set clear objectives for the British economy. Although we are in principle in favour of economic and monetary union, we have set five economic tests that must be met. Those tests involve looking at what is to happen to employment, financial services, industrial investment, convergence and flexibility and adaptability of labour markets to enable the single currency to work. Those are the tests that we shall apply in relation to Britain before we make a recommendation. That recommendation will have to be passed, not only by the House and by Parliament, but by a referendum of the British people.

Mr. Townend: Does the Chancellor agree that our European partners consider EMU a political, rather than an economic, issue—the great leap forward to political union? That is why they will proceed with EMU, regardless of the fact that some countries do not meet the

economic convergence criteria. Is it not nonsense to say that economies have converged when one of the most important criteria—unemployment—is not being considered? How can economies be said to have converged when Spain has 22 per cent. unemployment, Germany has 12 per cent., France has 12 per cent. and we have 5 per cent.?

Mr. Brown: It is precisely because unemployment is high in Europe that we have taken our initiatives including the Luxembourg special conference on jobs; the action plans that will be set by member states; and the commitment given by countries to reduce youth and long-term unemployment.
As for Europe, I know that the hon. Gentleman has always been against a European monetary union and none of the facts either way will change his mind on the issue. He should note that, whereas in the first five years of the 1990s, inflation was nearly 6 per cent. on average in Europe, it is now just over 2 per cent.; and, where deficits were about 6 per cent. of GDP, they are now about 2 per cent. as well. Considerable progress has been made towards convergence in those European economies.

Mrs. Dunwoody: My right hon. Friend will of course accept that the price for that has often been high unemployment. [HON. MEMBERS: "Hear, hear."] Would he be kind enough to ensure that whatever happens in relation to the creation of the monetary system, a full discussion takes place with the British public so that they understand the disadvantages and not the supposed advantages alone?

Mr. Brown: We are not only committed to a referendum if that decision is recommended by the Government and the House: we are also committed to making sure that the British public are informed about economic and monetary union and all the issues referring to it. My hon. Friend should note that the issue of employment is uppermost in our mind and it is one of the five economic tests that we have set down. In order for monetary union to work, we will have to reduce substantially the amount of unemployment in Europe. The cheers of support for my hon. Friend from Conservative Members come a bit strange because it was their party which said that unemployment was a price worth paying.

Mr. David Heath: In the right hon. Gentleman's discussions in ECOFIN or elsewhere on monetary union, has any consideration been given to the future of the administrative currencies and will the advent of the euro mean the demise of the green pound?

Mr. Brown: Matters of agricultural reform are under discussion as a result of the Commission's proposals to reduce the amount of money spent on the agricultural budget. We are profoundly committed to such reform. The hon. Gentleman will see us pursue proposals during our presidency and afterwards that will attempt to reduce that agricultural budget. Of course there will be consequences for the agricultural pound as a result.

Fuel (VAT)

Mr. Caplin: If he will make a statement concerning his policy to reduce VAT on fuel. [27210]

Mr. Barry Jones: What representations he has received from pensioners' organisations on his reduction in VAT on fuel.

The Paymaster General (Mr. Geoffrey Robinson): rose—

Hon. Members: Hear, hear.

Mr. Robinson: I am pleased to tell my hon. Friends that we have reduced VAT on fuel to 5 per cent.—the lowest level permitted to us under European Community regulations. That reduction has been very well received throughout the country, in particular by pensioner communities.

Mr. Caplin: I was delighted to note that my hon. Friend was greeted so warmly by those on the Conservative Benches. The pensioners in my constituency of Hove greatly welcome the cut in VAT. Would he care to contrast the efforts made by the Government with those of the Opposition and the Liberal Democrats?

Mr. Robinson: In addition to the cut in VAT, other measures relating to the gas levy and the winter fuel payments paid by my right hon. Friend the Chancellor mean that pensioners are between £100 and £130 better off per year. All one can say about the Conservative party is that when in government it managed to introduce 22 tax increases. The only tax reduction was that introduced as a result of the actions of the Labour party in opposition and the Liberal Democrats, who fought against the Conservative Government increasing VAT on fuel to 17.5 per cent. What we need to know this afternoon is whether the Opposition are in favour of increasing it again to 17.5 per cent.—yes or no?

Mr. Barry Jones: Will my hon. Friend allow me to thank the Chancellor of the Exchequer for the action that he has taken in this sphere? He should know that pensioners in my constituency are glad of what he has done. Is it not a fact that the Labour Government keep their promises?

Mr. Robinson: The reduction in VAT on fuel was one of the five pledges in our manifesto, and it has been redeemed; we are in the course of fulfilling the other pledges. I am pleased to have my hon. Friend's confirmation that pensioners in his constituency appreciate that action while the Opposition hang their heads in shame at the fact that they took no action when in government.

Mr. Ian Bruce: Surely the hon. Gentleman will know that his Department has told me that the increases in VAT announced by the previous Government were fully or overcompensated to pensioner households. Surely what we need to do for pensioners is to keep tax rates down.

Surely the best way to do so would be to makes sure that rich business men pay their taxes and do not keep the money offshore.

Mr. Robinson: The best thing we did was to get rid of the Tory Government. That was the first step. Next, we reduced VAT on fuel. We then made the winter fuel payments and introduced the rebate on the gas levy. Those practical measures have helped people who live in the real world. The hon. Gentleman should be ashamed of his question.

Rev. Martin Smyth: Although the reduction of VAT on domestic fuel for pensioners is welcome, will the hon. Gentleman bear it in mind that increasing taxes on diesel and other transport fuels will have an adverse effect on the peripheral regions, and especially on firms engaged in export?

Mr. Robinson: I welcome the first part of the hon. Gentleman's question. All the other matters are being considered by my right hon. Friend the Chancellor in the context of the Budget.

Dr. George Turner: The pensioners who are visiting the House today from my constituency are extremely pleased about the reduction in VAT on fuel, but tomorrow concerns them as much as yesterday. Many of them count the buses that pass their door by the number per week, not the number per day. Can my hon. Friend assure them that when the Chancellor draws up his Budget, he will take fully into account the distinctive needs of those who live in rural constituencies, now represented mainly by those on the Labour Benches?

Mr. Robinson: I should be pleased to meet my hon. Friend's pensioners with him. I assure them that all those matters are under consideration. In particular, he will be aware that a major review of pensions is under way. We hope to answer positively to his pensioners and his other constituents in due course.

Housing (Capital Receipts)

Mr. Sanders: When he will announce his plans for the next phase of the housing capital receipts initiative. [27211]

Mr. Geoffrey Robinson: In line with our policy as stated in the manifesto, and in line with Liberal Democrat policy—we welcome the hon. Gentleman to an agreed policy—£900 million is to be released in the first phase of the release of capital receipts: £200 million this year and £700 million in 1998–99. That is a good start.

Mr. Sanders: I draw the Paymaster General's attention to the fact that, in the controlled spending targets for public sector housing this year, there is a £200 million reduction, which knocks out the £200 million made available under the Local Government Finance (Supplementary Credit Approvals) Act 1997. That is not the release of capital receipts; it means that local authorities will be allowed to borrow money against the value of the capital receipts. Furthermore, the hon.


Gentleman referred to £900 million. Can he clarify how that relates to the figure of £800 million given by the Prime Minister yesterday?

Mr. Robinson: We welcome the hon. Gentleman's agreement with our policies. The £200 million this year is a separate issue. Why does he not focus on the £700 million that will be genuinely additional next year? He is well aware that we went for supplementary credits because the receipts were not in those areas where housing need was greatest. That is the best mechanism that we could find to make sure that the receipts were released in those areas, rather than in areas of less need.

Mr. Coaker: Will my hon. Friend ensure that social housing receives its fair share of resources over the next few years? One of the greatest stigmas that we see is the plight of the homeless, and one does not have to go very far from the House to see that. Social housing is desperately needed in many parts of the country to rehouse the homeless and to ensure that everyone has a decent place to live.

Mr. Robinson: I entirely agree with my hon. Friend. He is aware that the new deal programme is specifically designed to help the young homeless, and that we have split up the housing receipts to take care of regeneration, as well as rehabilitation. Taken together, those measures will go a long way to meeting his genuine and justified concerns.

Mr. Sayeed: As the Minister could not answer the very good question from the hon. Member for Torbay (Mr. Sanders), perhaps I could ask him a simpler question. In Islington, one in 16 council-owned properties lies empty, while Islington councillors go around complaining about homelessness. How will the Minister make sure that giving those capital receipts to local authorities will ensure that they place homeless people in the homes that have been standing empty for many years?

Mr. Robinson: It is a terrible indictment of 18 years of Conservative rule and bashing of local councils that the hon. Gentleman admits that that is the case. What we are doing through the release of receipts will enable—[Interruption.] Many of those problems were caused by central Government through the Tories bashing local authorities and reducing them to a position where they could not take decisions, which was the point of Tory policy. One of the reasons why so many of the houses are unoccupied is that they need urgent rehabilitation. That is what the phased release of capital receipts will achieve.

Mr. Miller: Is my hon. Friend aware that, in my constituency, the waiting time in the local authority housing sector for a couple with one child increased from one month to nearly four years between 1986 and 1996? Is my hon. Friend aware that that waiting time is dropping under Labour policies? Will he ensure that the next phased release of capital receipts takes account of the actions taken by local authorities to bring about such reductions, and thus relieve the burden on housing benefit and other charges to the Exchequer?

Mr. Robinson: My hon. Friend is quite correct, and I entirely agree with him. In the context of the comprehensive spending review, we are looking at what

the next phase of releases will be. It is too early to predict that yet. My hon. Friend makes precisely the point in respect of his council that I made a moment ago: the previous Government's housing and general local government policies caused a terrible situation, with deteriorating housing stock. We are grappling with that problem, and the phased programme of capital receipts release will contribute to solving it.

Corporate Taxation

Mr. Jenkin: When he expects the review of corporate taxation to be concluded. [27213]

Mr. Darling: The Inland Revenue has recently consulted business on proposed changes to the corporate taxation regime. That consultation period ended on 30 January. Any further announcements are, of course, a matter for my right hon. Friend.

Mr. Jenkin: Where is the Confederation of British Industry at fault in its analysis that the Government's announced corporation tax changes will amount to a £22 billion increase in tax in this Parliament?

Mr. Darling: The changes that we have made to the corporation tax regime will greatly help industry. The tax system will no longer be the determining factor as to whether profits are retained or distributed—that is properly a matter for managers. The tax changes have allowed us to reduce the rate of corporation tax, as has been said many times this afternoon, in order to ensure that we have one of the lowest rates of corporation tax of any of our major competitors.

Mr. Sheerman: Will my right hon. Friend ensure that any such review takes seriously the suggestions that Labour Members often make that corporations should be given certain incentives to invest in universities and university research that creates jobs? Is he aware that the Dearing report recommended that an extra £500 million—much of it coming from the corporate sector—be invested in universities? We have not seen much of that money yet.

Mr. Darling: My hon. Friend is correct: we want industry not just to invest in its own development but to co-operate with educational institutions. I am aware that the Dearing committee expressed a similar hope. I think that my hon. Friend will agree that the reduced level of corporation tax, together with the other steps that we are taking to encourage business, will prompt businesses not just to co-operate with educational institutions but to make the necessary investment that will benefit individual businesses as well as the wider economy.

Mr. Lilley: Should not the Chancellor have completed his review of corporation tax before he announced his ill-thought-out changes, which impose a hefty burden on pension funds and companies? Would he not then have avoided stumbling from announcing the abolition of tax credits in July—without realising that that would involve abolishing foreign income dividends—to abolishing advance corporation tax in the autumn, which then required him to introduce a new system of quarterly payments in his autumn statement, which he will now have to revise in his March Budget because of the


criticisms from the CBI? Will he confirm to the House that unless he does so, despite the change in the corporation tax rate, the changes so far announced will increase the burden on business by £22 billion?

Mr. Darling: As regards the consultation exercise, most of the responses have been very positive. I should have thought that the right hon. Gentleman would welcome that. I repeat that the changes we have made to the corporation tax regime will be to the long-term benefit of companies in this country and the economy. I think that most people recognise that.

Taxation and Welfare Systems

Mr. McCabe: What plans he has for merging the systems of personal taxation and welfare benefits. [27214]

Mr. Gordon Brown: As I stated in the pre-Budget report, we plan to build on our £4 billion welfare-to-work programme, and unveil in the Budget the second stage of our plan to modernise the welfare state. To encourage work and to help low-paid families, we are now considering in detail the introduction of a working families tax credit, paid through the tax system. That would also allow us to do more to help with the cost of child care.

Mr. McCabe: I am grateful to my right hon. Friend for that reply. Can he confirm that the working families tax credit will be of significant benefit to a great many women already in work and those who want to work? Will he further confirm that allegations that there will be a compulsory transfer of resources from women to men, or that there is a threat to independent taxation, are completely untrue?

Mr. Brown: I can reassure my hon. Friend. As I made clear in the pre-Budget statement, the Budget will include the next stage of the modernisation of the welfare state—reform of tax and benefits to make work pay, which will be of particular benefit to women. There is no threat to independent taxation from the working families tax credit, nor would there be a compulsory transfer of resources from women to men. If the working families tax credit replaced family credit, families would have the right to elect to whom the tax credit was paid, the man or the woman.

Mrs. Lait: I offer my commiserations at the fact that Treasury Question Time this afternoon has been a woman-free zone.
I appreciate hearing that independent married women's tax will not be affected after the heavy leaking that there has been of the Budget plans, but will the Chancellor please assure us that every married woman, whatever her level of earnings, will not lose by the changes that he is promising?

Mr. Brown: The compulsory transfer of resources from women to men is not proposed in any of the detail that has been examined by the Treasury. The existing system of family credit, for which the Conservative party was responsible, has only a 69 per cent. take-up; 645,000

people have a marginal tax rate above 70 per cent.; 500,000 people are paying tax as they receive benefit; and only 31,000 have been able to receive the child care disregard. That is not a system that is working in favour of women or children, and we shall reform it and make it better.

Mrs. Anne Campbell: Will my right hon. Friend ensure that in the forthcoming Budget he does whatever possible to remove the poverty trap for lone parents, and thus give a welcome boost to the new deal for lone parents which has helped so many women in my constituency and elsewhere in the United Kingdom?

Mr. Brown: It is a symbol of what the Conservative party was about in government that it took care to deal with the disincentives for people on high tax rates, but left people with high marginal tax rates if they were low paid. As a result of Conservative policy, 360,000 families have an 80 per cent. marginal tax rate and more than 100,000 have a 90 per cent. marginal tax rate. That is unacceptable. It is a disincentive to work, it is unfair to mothers and their children, and Britain can do better. That is why we are modernising the British welfare state.

Mr. Fallon: Will the Chancellor confirm the Financial Secretary's apologies for bunking off this afternoon to discuss more of the Budget with the sisters of the Fawcett Society following her Budget leak to The Daily Telegraph this morning? Could not women still be pressurised by their husbands into not applying for direct payment of the working families tax credit and, even if they do apply, will not their husbands still know what they earn?

Mr. Brown: Under the present system, the woman and the man have to sign the family credit form. The hon. Gentleman should consider that before he makes such allegations. The hon. Gentleman has to face up to the fact that thousands of women—even in work—and children are left in poverty as a result of the policies that we have inherited from the previous Government. That is why we must begin to reform the welfare state.
The Financial Secretary is addressing a conference this afternoon, the Economic Secretary is ill, and both have sent their apologies to the House.

Windfall Tax

Ms Keeble: What is the current level of receipts from the windfall tax. [27216]

Mr. Geoffrey Robinson: The first tranche of the windfall tax was paid on 1 December, in full and on time, and we are grateful to the companies for their co-operation in this matter.

Ms Keeble: Will my hon. Friend confirm that the £2.6 billion that has been raised is exactly what was expected? Does not that give the lie to the previous criticisms that the tax was unworkable? Will he also confirm that the amount raised already is more than the £2.2 billion that the Liberal Democrats would have raised through their 1p in the pound on income tax?

Mr. Robinson: My hon. Friend is correct. Now that we have the money, we can ensure that we spend it wisely. We note that the Opposition agreed with the ends, but would have denied us the means. I am pleased to tell the House that the pathfinder programmes are doing extremely well and the whole country is looking forward to the overall national deal beginning on 4 April.

Mr. Clifton-Brown: Will the Paymaster General now answer the question that was ably put by my hon. Friend the Member for Bury St. Edmunds (Mr. Ruffley): when will the cost of the welfare-to-work programme reduce?

Mr. Robinson: It is an odd question. I heard it earlier—[HON. MEMBERS: "Well, answer."] Exactly, I will. We have not begun the national programme for welfare to work. It does not begin on a national level until 4 April, so how can anybody ask us to show results now? That programme will yield results. The Opposition should have implemented such a programme when in government instead of letting youth unemployment build up. Instead of scoffing and trying to point ridicule at a sincere programme to deliver the goods, Conservative Members should be out in their constituencies, as we are, trying to make the programme a success.

Business of the House

Mrs. Gillian Shephard: May I ask the Leader of the House to make a statement on the business for next week?

The President of the Council and Leader of the House of Commons (Mrs. Ann Taylor): The business for next week is as follows:
MONDAY 16 FEBRUARY—Second Reading of the Human Rights Bill [Lords].
TUESDAY 17 FEBRUARY—Debate on Iraq, on a Government motion.
WEDNESDAY 18 FEBRUARY—Until 12.30 pm, debate on the first report from the International Development Committee on Montserrat, followed by a debate on the first report from the Education and Employment Committee on teacher supply. Followed by debates on the motion for the Adjournment of the House.
Motions on the Social Security Benefits Up-Rating Order, the Social Security (Contributions) (Re-Rating and National Insurance Fund Payments) Order, the Guaranteed Minimum Pensions Increase Order, and the Social Security (Incapacity for Work) (General) Amendment Regulations.
THURSDAY 19 FEBRUARY—Until 7 pm, motions on the Scottish Revenue Support Grant Reports, the Housing Support Grant (Scotland) Variation Order and the Housing Support Grant (Scotland) Order. Details will be given in the Official Report.
FRIDAY 20 FEBRUARY—The House will not be sitting.
The provisional business for the following week is as follows:
MONDAY 23 FEBRUARY—Consideration in Committee of the Scotland Bill (Fifth Day).
TUESDAY 24 FEBRUARY—Consideration in Committee of the European Parliamentary Elections Bill (First Day).
WEDNESDAY 25 FEBRUARY—Until 2 pm, there will be debates on the motion for the Adjournment of the House.
Consideration in Committee of the Government of Wales Bill (Sixth Day).
THURSDAY 26 FEBRUARY—Consideration in Committee of the European Parliamentary Elections Bill (Second Day).
FRIDAY 27 FEBRUARY—Debate on the Government's priorities for women on a motion for the Adjournment of the House.
The House will also wish to know that on Wednesday 18 February there will be a debate on the Court of Auditors report for 1996, and sound financial management, in European Standing Committee B.
Details of the relevant documents will be given in the Official Report.

[Wednesday 18 February:

European Standing Committee B—Relevant European Community Document: (a) OJ No. C348, Court of Auditors Report for 1996; (b) SEM 2000/3, Sound Financial Management. Relevant European Legislation Committee report: (a) HC 155-xiv (1997–98); (b) HC 155-xvi.

Thursday 19 February:

Relevant Reports—The Local Government Finance (Scotland) Order 1998; The Revenue Support Grant (Scotland) Order 1998; The Special Grant Report (98/1) (Scotland): Local Taxation Collection Grant Scheme 1997–99 (House of Commons Paper No. 530); The Special Grant Report (98/2) (Scotland): Grant in Aid of Local Authority Revenue Costs and Reinstatement Works at Dunblane Cemetery Resulting from the Dunblane Tragedy (House of Commons Paper No. 531); The Housing Support Grant (Scotland) Variation Order 1998; the Housing Support Grant (Scotland) Order 1998.]

Mrs. Shephard: I thank the Leader of the House for her statement and for giving us the provisional business for the week after next, which is always helpful to the House. We welcome the debate on Iraq. As I said last week, it is also very helpful to have debates on Select Committee reports.
Following the Prime Minister's answer yesterday, which was a rare event in itself, will the Leader of the House now arrange for an early clarification to the House of the Government's position on the impact of the Human Rights Bill on religious freedom in this country? Will she confirm that the Government's view on this matter is not the same as that of the Lord Chancellor, who, like his self-nominated predecessor, Cardinal Wolsey, seems likely to run into trouble with the Church? We know how that ended.
Are we right to assume that there will be a special guest appearance in the Chamber of the Minister without Portfolio next week, to enable him to explain to the House what he expects to be the contents of the dome, before he embarks on the glitzy press launch that he has already planned for 24 February? It would be nice for the House to know first.
Does the right hon. Lady plan to have the Secretary of State for Social Security come to the House to give further details of her benefits integrity project? Next Wednesday's debate may give an opportunity for that. The bare bones of the project were laid out in a written answer last Monday, but, given the Government's customary disregard for parliamentary procedure—I am sorry to have to say that—the media and, I think, a hand-picked audience in Middlesbrough may be more knowledgeable than the House about the Secretary of State's plans.
How would the right hon. Lady describe the details of the tax changes for women that were mentioned in The Times and The Daily Telegraph today? Would she describe them as a leak, as a briefing or pure speculation?
Will the right hon. Lady arrange for the Minister of Agriculture to come to the House and explain why on Tuesday night he was to be seen lolling about in the Smoking Room instead of being in the Chamber defending his ban on beef on the bone? The Government have a profound contempt for Parliament, but the Minister of Agriculture, even by his Government's standards, showed on Tuesday that power has gone to his head. His utter disregard for his responsibilities will not have gone unnoticed either by farmers or by consumers.

Mrs. Taylor: Several of the questions asked by the right hon. Member for South-West Norfolk (Mrs. Shephard) have already been answered by


Ministers today or by the Prime Minister yesterday. I shall comment on whether some of the issues she mentioned are suitable for debate next week.
Yesterday, the Prime Minister said that he would consider the issue of religious freedom, which was raised by the right hon. Member for South-West Surrey (Mrs. Bottomley). It would be unreasonable to expect me to say anything further just 24 hours later.
The Minister without Portfolio will answer questions on Monday. He does not select the questions to be asked, so who gets a chance to ask him questions will depend on who catches Madam Speaker's eye. I am sure that his answers will be of their usual high quality.
I am sure that the right hon. Member for South-West Norfolk accepts that we should ensure that claimants receive the right benefit, and that as the money comes from public funds, benefits are paid only to those who are entitled to them. The benefits integrity project is sensible, and I am surprised that any hon. Member would criticise it.
The right hon. Lady asked me to speculate about possible tax changes for women in the Budget. That matter was dealt with by my right hon. Friends during Treasury questions, and I do not think that anything should be said before the Budget.
On the last matter that the right hon. Lady raised, I am glad that my right hon. Friend the Minister of Agriculture has so much confidence in his junior Ministers.

Mr. Harry Barnes: It has been decided not to extend the waiting period for entitlement to jobseeker's allowance from three to seven days. May we have a debate about tackling another gap: the pensions gap? People who are entitled to pensions often have to wait six days before they receive them.

Mrs. Taylor: I know that this is an issue in which my hon. Friend has taken an interest. There is a long-standing arrangement for entitlement to benefits and pensions. I do not think that this matter can be equated with the changes that were proposed for jobseeker's allowance, and I am afraid that I see no prospect of an early debate on it.

Mr. A. J. Beith: May I thank the Leader of the House for her helpful response to our request for a debate on the Government's proposed changes in the jobseeker's allowance? We referred to those changes in our early-day motion 689.
[That an Humble Address be presented to Her Majesty, praying that the Jobseeker's Allowance (Amendment) Regulations 1998, (S.I., 1998, No. 71), dated 15th January 1998, a copy of which was laid before this House on 23rd January, be annulled.]
The right hon. Lady has now withdrawn the order, and we regard that as a satisfactory response. While I am on a winning streak, may I express our view that consideration of the Human Rights Bill would be much more effective if the general principle were tackled in a Committee of the whole House, and the detail were scrutinised in Standing Committee?

Mrs. Taylor: I have nothing to add to what I said about jobseekers, except that the Government's approach was very reasonable, given that the changes were not due to

come into force for two years, and given that a full-scale examination of welfare reform was to take place in the interim. It would have been silly to anticipate the outcome of that.
I know that there are differing views in different parties in the House about the way in which the Human Rights Bill should be handled. Some believe that splitting consideration of significant legislation often benefits the House, enabling hon. Members to scrutinise it properly and to achieve the right balance between decisions made on the Floor of the House and decisions made in Committee. No final decision has been made, but we are listening to representations.

Mr. Jim Marshall: I congratulate my right hon. Friend on arranging a debate on Iraq for next Tuesday. I am particularly pleased that the motion will be amendable, so that hon. Members can express different views and, if necessary, vote in support of those views.
Can my right hon. Friend give us some idea of when the Government are likely to introduce measures that will transpose the European works council directive into British law, so that British workers can enjoy the same rights as their counterparts in other European Union countries?

Mrs. Taylor: I am glad that my hon. Friend appreciates the fact that we are to have a debate on Iraq. I think that members of all parties will agree with him. The debate will indeed provide an opportunity for different views to be expressed, although I think that the overall view of the House is very clear. My hon. Friend is right to point out that the motion will be amendable, and that a vote on it is possible.
As for the social chapter and the European works council directive, my hon. Friend will know that the Government have undertaken to implement the measure within two years of the formal extension to the United Kingdom. I think that we shall make progress in the near future.

Sir Raymond Whitney: Yesterday, my hon. Friends the Members for Chesham and Amersham (Mrs. Gillan), for Beaconsfield (Mr. Grieve) and for Aylesbury (Mr. Lidington) and I received written communications from more than 1,400 of our constituents, expressing deep concern about the impact of the local government financial settlement on services provided by our county council. Will the Leader of the House provide time for the House to debate the serious effect that the settlement is having not only on Buckinghamshire but on other counties?

Mrs. Taylor: I am sure that the hon. Gentleman knows the constraints under which the Government are operating in respect of the previous Government's spending plans. He will also know that we have had a debate on the settlement, in which many hon. Members on both sides of the House were able to participate.

Mr. Dennis Skinner: Does the Leader of the House recall that, last week, I called on the energy Minister to make a statement about the possibility that 55,000 retired miners and widows of retired miners would


lose up to 16 cwt of concessionary coal? Now that the Prime Minister has made it clear that consultation is to be extended, will the Leader of the House convey to the energy Minister that, if he makes a statement to the House saying that the circular concerned has been withdrawn and that the concessionaires will receive their benefit, I will promise not to duff him up? Indeed, I will thank him.

Mrs. Taylor: It might be worth arranging that in order to see my hon. Friend pouring praise on a colleague. As he knows, I wrote to Ministers last week following his representations, because I was aware that there was a great deal of concern about the issue. I think that my hon. Friend was expressing the concern of many people. However, he heard what my right hon. Friend the Prime Minister said yesterday, and I am sure that he is pleased that some progress has been made—although we must, of course, await the final outcome.

Mrs. Virginia Bottomley: The right hon. Lady may be aware that, on every occasion that the Government have been asked about their intentions on the Mental Health Act 1983, they have denied intending to have a review. There has been a series of briefs, leaks, spins and denials, but the House has never been given information on the Act.
Yet again today, the BBC was informed that the Government were about to announce a review. It is becoming extremely tedious for Members that information is always given to the media before it is given to the House. I would strongly welcome a review of the Act—I think that the pendulum has swung too far—but I should be most grateful if the right hon. Lady would convey to Ministers that it would be courteous to inform the House first.

Mrs. Taylor: I must first say to the right hon. Lady that no one has been informed of any intentions on this matter. If a document that has not been agreed by Ministers is leaked, it is difficult to present that as a deliberate leak by the Government. However, I am glad that she would welcome a review in this sector. During the term of the previous Government, many people said that change should be made because—as she now acknowledges—the pendulum had swung too far. It is an important issue. I am not sure that we can have a debate in the near future, but when proposals come from my right hon. Friend the Secretary of State for Health, I am sure that he will welcome widespread discussion.

Mr. James Wray: Will the Leader of the House provide time for a debate on the case of T. C. Campbell and Joseph Steele? I have been asked by their families to make inquiries into the interpretation by the three judges of the Crime and Punishment (Scotland) Act 1997 and their subsequent decision. On 1 May 1996, I asked the then Secretary of State for Scotland, Michael Forsyth, to review the Steele and Campbell case under section 124 of the Criminal Procedure (Scotland) Act 1995. As Scotland will not have a criminal review commission until April 1999—England and Wales have one—will my right hon. Friend arrange a debate urgently?

Mrs. Taylor: I am not aware of all the details of the case that my hon. Friend mentions. I will bring his

remarks to the notice of my right hon. Friends. Perhaps it would be possible for him to raise the case at Scottish Question Time on Tuesday.

Mr. Dafydd Wigley: Will the Leader of the House arrange for an early statement on how the Government intend to fund the long-awaited and much-needed compensation for coal miners—and their dependants—suffering from emphysema and chronic bronchitis? Will she arrange for that statement to say how comprehensive such a settlement will be—will it cover other industrial workers—and to give an assurance that the funding of those payments will in no way come from coal miners' pensions, which the Government apparently intend raiding to the extent of £400 million?

Mrs. Taylor: Again, I cannot see time for an early debate, but I will draw the right hon. Gentleman's remarks to my colleagues' attention.

Mrs. Theresa May: Will the Leader of the House reconsider her response to the request of the shadow Leader of the House, my right hon. Friend the Member for South-West Norfolk (Mrs. Shephard), that the Secretary of State for Social Security make a statement in the House on the operation of the benefits integrity project? It is a question not of whether fraudulent activity should be cut out—I am sure that everyone agrees that it should—but of how the project is being operated and the hardship cases that are being brought to the attention of hon. Members: benefits are being cut, in some cases retrospectively, and, in some cases, benefits are being taken away altogether. Will the Leader of the House reconsider and ask the Secretary of State to make a statement about the changes that we understand she made to that project's operation?

Mrs. Taylor: As I understand it, the changes made the situation better, so that fairer decisions could be made and there was transparency. It is rich for Conservative Members, who did all in their power to cut benefits, now to complain about a system that is designed to introduce as much fairness as possible and to ensure that people who are entitled to benefits receive them and that those who make fraudulent claims are dealt with. I cannot see the prospect of an early debate on that specific matter, but I am sure that it is relevant to other issues that will be debated in the near future.

Mr. Bill O'Brien: Does my right hon. Friend recall that, a few weeks ago, I raised the issue of three deaths in my constituency following a fire in a private care home, and the fact that fire precautions should be considered by Parliament? My right hon. Friend suggested that I raise the matter in an Adjournment debate, but, given the difficulties in that, will she consider having a debate?
May I draw my right hon. Friend's attention to the fact that I have received a number of representations from constituents on the future of opencast coal mining? May we have a debate on that important matter which is causing great concern to many people who have opencast proposals in their communities?

Mrs. Taylor: I recall my hon. Friend raising the issue of fire regulations and the need for further precautions,


and the case he mentioned. I recommended an Adjournment debate, but my recommendation is not a guarantee that an Adjournment debate will take place. Perhaps he might persist in that course of action, although I will look at other ways in which I might be able to assist him.
As for opencast mining, my hon. Friend will be aware that Ministers have been looking at the matter. The consultation period has ended recently, and Ministers will make the position clear in the near future.

Mr. John Wilkinson: Can the Leader of the House grant us next week—unlike last night—an unclosured debate on local government in London? Is she aware of the real concerns that exist about the conduct within social services departments in Labour-controlled local authorities—particularly Hackney, but now Hillingdon—as evidenced by early day motion 777?
[That this House notes with deep concern the thorough report of the Social Services Inspectorate into the Social Services Department of Labour-controlled Hillingdon Borough Council which is highly critical of the failure of the Department to ensure the implementation of child protection regulations thereby putting children in care greatly at risk leading in two disturbing cases to unacceptable levels of abuse; further notes that the Chairman of the Social Services Committee has resigned from Hillingdon Borough Council; and urges the Council as a whole to take responsibility for the Department's culture of chaos and helplessness and to initiate immediate remedial action within the Department.]
The motion is signed by my hon. Friend the Member for Uxbridge (Mr. Randall), other London Members and me. Serious scandals involving the care of children have occurred which ought to come before the House.

Mrs. Taylor: If the hon. Gentleman has specific concerns, he can bring them to the attention of Ministers in other ways. His examples are not relevant to last night's debate, and I do not see the prospect of the overall debate he is asking for.

Mr. Tam Dalyell: Before Tuesday's debate or, better still, before my Adjournment debate tomorrow on the military situation in Iraq, could two documents be put in the Library? The first is an assessment by the Foreign Office of the situation between Iran and Iraq, which is mentioned on page 1 of The Times today.
Secondly, could there be a Ministry of Defence document outlining its sources of information and the validity of those sources, in the light of the fact that, in 1990–91, emotional appeals concerning babies that supposedly had been thrown out of incubators were made in the United States by a supposed nurse from a hospital in Kuwait? She turned out some months later to be the daughter of the Kuwaiti ambassador in Washington and had nothing whatever to do with the hospital. Sources of information become very suspect in these fraught situations.

Mrs. Taylor: I cannot guarantee to provide the two documents to which my hon. Friend refers. I hope that he welcomes the fact that we are having a debate on

Tuesday, as he is one of those who have pressed for it. He will be able to make the points he has raised with me in his Adjournment debate and, if he is fortunate enough to be called, next Tuesday.

Sir Sydney Chapman: I am confident that, as a member of the Cabinet, the right hon. Lady will be aware of the importance of design and innovation not only to our exporters, but to our environment. May I draw to her attention the Design Council's special week, the week after next? I pay tribute to the hon. Member for Huddersfield (Mr. Sheerman), who has arranged an exhibition in the precincts of the Palace. Could the right hon. Lady put the icing on the cake—I say this as a permanently struggling, but non-practising architect, so I have nothing to declare, Madam Speaker—by promising us an albeit short debate on this critical subject?

Mrs. Taylor: The hon. Gentleman's tactics were somewhat different from those of other Conservative Members in trying to lure me into acknowledging the need for a debate. I am very pleased that such an exhibition will be held, and, like many hon. Members, I shall of course try to visit it. Despite his very charming suggestions and his reasons for a debate, I cannot guarantee the debate that he requires. I shall bear his points in mind. If there are other occasions on which those issues can be raised, I am sure that he will use every opportunity.

Helen Jones: As the Government have today announced the first allocation of money from the assisted places scheme to cut class sizes at key stage one, will my right hon. Friend arrange for an early debate on the policy of cutting classes sizes—so that constituencies such as mine can hear from Conservative Members exactly why they fought for so long to prevent them from benefiting from that money?

Mrs. Taylor: I should very much like to be able to find time for a debate of the type suggested by my hon. Friend, not least because my local authority is one of those to benefit from the new money to reduce class sizes—which is on top of the £1,000 that each school will receive for books. A debate would allow us also to expose the divisions among Conservative Members on whether they still believe that class size does not matter, or whether the view being adopted by some Conservative Members—that our approach is better—is now their official line. It is a good news story, but, in such a crowded programme, we do not always have time to debate all the good stories that the Government would wish.

Mr. Owen Paterson: Yesterday was market day in Oswestry and Market Drayton, and the beef on the bone regulations and the absence from the debate of the Minister of Agriculture were described in terms that I would not describe as parliamentary. If the Leader of the House had any feel for those in the livestock and meat industries, she would not have dreamt of dismissing the request of the shadow Leader of the House in the terms that she did.
No measure that the Government have taken since 1 May has been more mocked by my constituents. In local newspapers, it is openly stated that butchers are


offering beef on the bone. The regulations are unenforceable, and, in the debate, it was revealed that the Prime Minister himself was actively involved in the final decision. Will he or his Agriculture Minister come to the House to make a statement?

Mrs. Taylor: We have had a debate on that matter, and the House reached a decision.

Mr. Andrew Mackinlay: Within the next two weeks, it is reasonable to expect that the Deputy Prime Minister will make a statement in the House on the channel tunnel high-speed rail link. Will the Leader of the House use her good offices to draw to his attention my amendment to early-day motion 770?
[That this House expresses concern over the announcement by London and Continental Railways that it is unable to fulfil its contract to build the Channel Tunnel Rail Link without further subsidy; welcomes the Deputy Prime Minister's preparedness to discuss any revised proposal from London and Continental Railways, his commitment to the House that Eurostar services will operate as normal, and his assurance of his wish to see the completion of the high speed rail link; believes that the agreed route through Kent to stations at Ebbsfleet, Stratford and St. Pancras, which was fully debated and scrutinised by Parliament, is environmentally designed and essential to the economic and social regeneration of East London and the Thames Gateway area which covers some of the most deprived communities in the United Kingdom; and furthermore believes that the sustainable transport improvements associated with the rail link, will, in addition to benefiting commuters, improve the mobility and employment prospects for residents in these areas and is equally essential for facilitating improved communications to mainland Europe for all the regions of England and Wales and via the West Coast Main Line to Scotland.]
My amendment draws attention to the great plight of some of those operating medium and small businesses in Kent, in my constituency of Thurrock and elsewhere in Essex, who—as we speak—are losing their businesses because of London and Continental's failure to agree reasonable terms and time scales for the purchase of properties. Jobs are being lost and family businesses are being destroyed because of that enormous hiatus and a scheme that is absurd as it stands. I make a plea to the Deputy Prime Minister to ensure that, whatever else happens, those businesses will not be allowed to founder because they are victims of the hiatus in constructing the route.

Mrs. Taylor: My hon. Friend raises serious issues which I realise must be a great concern to his constituents. I think that he will acknowledge that, as soon as possible, my right hon. Friend the Deputy Prime Minister informed the House of the difficulties. He has undertaken to keep the House informed. We are still not at the end of the 30-day period in which decisions have to be made. I am sure that the Deputy Prime Minister will be keeping the House informed, and that the concerns of hon. Members representing that area will be taken fully into account.

Mr. John Bercow: Will the Leader of the House find time next week for a statement by the

President of the Board of Trade in which she can explain to the House the whereabouts of the profit from the sale of shares in British Petroleum by the Minister for Trade and Competitiveness in Europe, Lord Simon? I hope that the right hon. Lady is aware that, last summer, the noble Lord publicly undertook that the profit on the sale would go to charity, but, in a letter to me dated 9 February 1998, he refused to confirm that he had made that donation. In the public interest, should not the President of the Board of Trade come to the House and clear up the confusion? If she will not, will the Leader of the House, in the name of decency and integrity, ask the noble Lord to do the right and proper thing for once?

Mrs. Taylor: It has been made clear from the Dispatch Box on several occasions that the noble Lord has done the right thing.

Ms Beverley Hughes: Has my right hon. Friend been made aware of reports of a sixfold increase in the use or misuse of drugs while driving? Does she share my concern that it is as yet a hidden, but potentially serious, issue in terms of reducing road traffic accidents and injury? I welcome the Government's recently announced drug-screening trials, but can my right hon. Friend assure the House that the information from those trials will be fed into the analysis that the anti-drugs co-ordinator is undertaking to identify priorities for the Government in terms of tackling the wide-ranging problem of drugs?

Madam Speaker: And could the Leader of the House arrange a debate?

Mrs. Taylor: I think that was the essence of my hon. Friend's question, Madam Speaker. I acknowledge that it is an important problem in which I take a particular interest. The information that came to light this week was important, but not definitive. As we have said, we will trial the testing procedure to see whether it is workable and how good the resulting information is. I shall bear in mind my hon. Friend's request for a debate and I shall certainly ensure that the anti-drugs co-ordinator is kept fully informed. He was party to the press conference where the information was given.

Mr. Andrew Lansley: Will the Leader of the House remind us on what occasions since May the House has had the opportunity to debate the national health service in Government time? In the light of that, will she find time in the next fortnight for a debate on the NHS White Paper, now that more than two months have elapsed since its publication? If not, will she give the House a commitment that she will seek to find time for a debate before health action zones or primary care group pilots are initiated at the beginning of April?

Mrs. Taylor: As I said last week, my right hon. Friend the Secretary of State for Health has made seven statements and has shown himself very keen to keep the House informed of all developments. As for debates, as I said to my hon. Friend the Member for Warrington, North (Helen Jones), who asked for a debate on education, it is not always possible for the Government to find time to debate all the good news stories—and that applies to health as well as education.

Mr. Bill Rammell: Will my right hon. Friend consider an early debate on university vice-chancellors' pay? I am sure that all hon. Members welcome the fact that the Government have given an additional £165 million to higher education this year, but they will be equally concerned at the news at the weekend that, in the past year, university vice-chancellors' pay has increased by double the rate of increase of lecturers' pay, and, in some cases, by as much as 28 per cent.? In my view, that constitutes a completely warped sense of priorities. I hope and believe that Education Ministers will make the concerns of hon. Members clear to university institutions and I would welcome an early debate.

Mrs. Taylor: I did not see the report to which my hon. Friend referred, but I shall draw the attention of Ministers to his comments. My only other suggestion is that he applies for an Adjournment debate on the subject, because I am afraid that I cannot find Government time for the debate that he requests.

Mr. Bernard Jenkin: May I draw the right hon. Lady's attention to the very crowded timetable of events leading up to the decision to be taken in May on which countries will participate in economic and monetary union and move to the third stage? Does she agree that the House is entitled to know and debate exactly how Her Majesty's Government will deploy their votes in the Council of Ministers on that decision? The 11 countries that are likely to participate are, on average, in excess of the debt and annual borrowing criteria, so this is an important issue, regardless of whether Britain decides to participate.

Mrs. Taylor: I cannot promise the hon. Gentleman a debate in the near future. I shall, of course, bring his remarks to Ministers' attention.

Mr. David Drew: In liaison with the Secretary of State for Health, will my right hon. Friend consider holding an urgent debate on the implications of bed blocking in hospitals? Much as we welcome the winter pressures money and the announcement that there will be a royal commission on community care, we are aware that hospitals currently face urgent problems, which is a matter that we would do well to air in the House.

Mrs. Taylor: My hon. Friend will have heard my earlier remarks. If he wants to draw a particular constituency problem to Ministers' attention, he can do so in the usual way or apply for an Adjournment debate. For the reasons that I outlined, there is not time in the immediate future for a debate on the Floor of the House.

Dr. Liam Fox: May I take the Leader of the House back to her comments to my right hon. Friend the Member for South-West Norfolk (Mrs. Shephard) on the millennium dome? I do not think that it is acceptable to the House to hope that the Minister without Portfolio will be asked the correct questions. If the contents of the dome are to be unveiled, they should be unveiled to the House first. When Ministers give information to the House, they are not doing hon. Members a favour—they are doing their constitutional duty. That applies especially

to a Government who say that they cannot afford to give money to county councils, but who can spend £750 million of public money on this project.

Mrs. Taylor: I remind the hon. Gentleman how the project started. I did not hear his dissenting voice when the Conservative party was in government. On Monday, my hon. Friend the Minister without Portfolio will be here to answer questions and we have doubled the amount of time available for hon. Members to ask him questions.

Mr. Norman Baker: May I ask the Leader of the House, as I have previously, whether she can find time for a short debate on animal experimentation? I remind her that, according to Home Office figures, 2.7 million experiments, many of which are deeply unpleasant, are carried out on animals each year. Moreover, the number of experiments carried out by the Ministry of Defence at Porton Down has trebled. That is a matter of great concern to hon. Members of all parties, as has been reflected in early-day motions, oral questions and attempts—sadly unsuccessful—to secure Adjournment debates.

Mrs. Taylor: I am sorry that attempts to secure Adjournment debates have been unsuccessful. There are far more applications for Adjournment debates than can be granted—it is right that there should be so many—and hon. Members may have to be persistent in their requests. Many hon. Members on both sides of the House are extremely concerned about animal experimentation and I believe that, in the agreements that have been arrived at—on cosmetics testing, for example—the Government have moved in the right direction, which has been widely welcomed. I can only advise the hon. Gentleman and his colleagues to be persistent; perhaps, finally, someone will secure an Adjournment debate.

Sir Patrick Cormack: Is the right hon. Lady aware that, next Wednesday, one of the most remarkable—indeed, one of the greatest—parliamentarians of modern times, the right hon. Enoch Powell, will be laid to rest? Does she agree that it is rather unfortunate, although it is no one's fault, that the procedures of the House do not allow us to pay even brief tribute to notable parliamentarians unless they have held the highest office of state?
Will the right hon. Lady do two things? First, when the Modernisation Committee meets next week, will she raise the matter of how we can pay adequate tribute to those who have served Parliament and the country with great distinction? Secondly, will she consider allowing the briefest Adjournment—lasting two or five minutes—at 11 am next Wednesday, when the funeral service for Enoch Powell begins?

Mrs. Taylor: There have been many people who have served the House well whose deaths have not been acknowledged because they were not serving Members at the time. It is difficult to make special arrangements for one person. The hon. Gentleman will be aware that much has been said about Enoch Powell and, no doubt, much more will be said. Opportunities are open to hon. Members, such as early-day motions, but that is up to the individual. As the hon. Gentleman asked me to do so, I will take his views back to the Modernisation Committee, but it is extremely difficult to make arrangements that would be fair to everyone.

Points of Order

Mr. Mike Hall: On a point of order, Madam Speaker. During the statement on the resignation of the Director-General of the Office of the National Lottery, Oflot, I advised the House that he had taken trips in a jet around the United States of America before the lottery was awarded to Camelot. I should have said that it was after the lottery was awarded, but before it was up and running. I am grateful for this opportunity to put the record straight.

Madam Speaker: Thank you.

Dr. Liam Fox: On a point of order, Madam Speaker. This is a matter of some concern to the House. Given the exchanges today about the release of information to the House, will you make it clear—in line with your previous statements on the subject—that if information on the contents of the millennium dome is released to the public before it is released to the House, that would be contemptuous of this House and against the spirit of your previous rulings?

Madam Speaker: The entire House knows that I always want major decisions and such information to be given to the House first. I am glad to have been given this public opportunity to make it known that, whether it is the millennium dome or any other policy statement from the Government, it comes to the House first before going to the media.

Orders of the Day — Scotland Bill

[4TH ALLOTTED DAY]

Considered in Committee [Progress, 10 February].

[MR. MICHAEL LORD in the Chair]

Clause 61

SCOTTISH CONSOLIDATED FUND

Mr. Michael Ancram: I beg to move amendment No. 309, in page 26, line 4, after 'State', insert
`, having first taken into account the needs of Scotland in relation to the needs of the United Kingdom as a whole,'.

The Second Deputy Chairman of Ways and Means (Mr. Michael Lord): With this, it will be convenient to discuss the following: Amendment No. 77, in page 26, line 4, leave out from 'shall' to end of line 6 and insert
`in respect of each financial year make payments into the Fund equalling the revenue raised by the Exchequer in Scotland and in the Scottish sector of the United Kingdom continental shelf.'.
Amendment No. 292, in page 26, line 4, after second `time', insert
'and at least once in every financial year'.
Amendment No. 111, in page 26, line 5, leave out from `Parliament' to end of line 6.
Amendment No. 78, in page 26, line 6, at end insert—
'(2A) The Scottish Ministers shall in respect of each financial year make payments to the Secretary of State equal to an amount agreed with the Treasury for the Scottish share of United Kingdom expenditure in relation to reserved matters.'. Amendment No. 86, in page 26, line 6, at end insert—
'(2A) The total sum to be paid under subsection (2) in respect of any financial year shall be assessed at a figure which takes account of the respective needs of each part of the United Kingdom.'.
Amendment No. 112, in page 26, line 6, at end insert—
'(2A) The payment referred to in subsection (2), shall consist of the block grant in force at the passing of this Act, as determined on the basis of the Barnett Formula, for the first full year of the Parliament's operation commencing on 1st April 2000.
(2B) Adjustments to the Barnett Formula to take account of population changes shall be made following the publication of census and mid-census population figures.
(2C) In this Act "Barnett Formula" means the non-statutory mechanism for calculating, on the basis of proportions of population, the equivalent changes to the budgets of the territorial departments following changes to programmes and budgets in England.'.
And the following amendment thereto: (a), at end add—
'(2D) Any review of the operation of the Barnett Formula shall be carried out jointly by the Scottish Parliament and the Parliament of the United Kingdom.'.
Amendment No. 293, in page 26, line 6, at end insert—
'(2A) No payment may be made under this section until the Secretary of State has laid before the House of Commons a statement certifying that the payment is based on the needs of Scotland in relation to the United Kingdom as a whole.'.


Amendment No. 294, in page 26, leave out lines 15 to 18.
Amendment No. 295, in page 26, line 22, at end add—
'(9) Before making any payment into the Fund, the Secretary of State shall consult and invite representations from interested parties, including the Scottish Parliament.'.
New clause 12—Review of the funding formula—
'.—A joint review of the funding formula for the Parliament shall be completed for implementation in the tenth year following the establishment of the Parliament, with the review being based on the principles of—

(a) increasing the proportion of the revenue provided to the Parliament and, under the control of the Parliament, from the Scottish tax base, and
(b) reducing the dependency of the Parliament on United Kingdom Treasury grants.'

Mr. Ancram: I shall begin by speaking to amendments Nos. 294 and 295, to clear them out of the way. The former, to leave out clause 61(6), is a probing amendment. I am interested in the provision in the clause, and it would be useful to ascertain the manner and circumstances in which it is envisaged that such a provision will operate. That would demonstrate to the Committee the balance of what is proposed in the clause. I hope that the Minister will be able to help us on that.
Amendment No. 295, in simple terms, requires the Secretary of State to consult before he makes payments into the fund. I am always told in the House that Secretaries of State do consult. However, when I try to take a consultation clause out of any Bill, I am told that if I do so, the Secretary of State will not consult. Therefore, I have yet to be convinced that the absence of a consultation requirement forces, or allows, a Secretary of State to consult.
In this case, that is important. As the provision stands, the Secretary of State is required to consult no one but himself and, obviously, to obtain the consent of Parliament. When he comes to a decision on payments to be made, he should consult the Scottish Parliament, which will certainly have a view as to the level of the payments, as well as other interested parties in Scotland. They may include business groups, trade unions and many others with views on the resourcing requirements. Those interested groups should form part of the process by which the Secretary of State makes his determination.
It is surprising that amendment No. 292 should be necessary. It is a simple amendment that would insert the requirement that a payment shall be made
at least once in every financial year".
The Minister may say that there will be an annual payment, but that is not specified in the Bill. The amendment would insert a simple and innocuous provision. I hope that adding the words "at least" might make it even more attractive to the hon. Member for Dundee, East (Mr. McAllion), who is sitting at the back. He might want to press the Minister to support the amendment.
The main amendments are Nos. 309 and 293. I argue for them with the utmost seriousness. Amendment No. 309 would introduce a general and deliberately non-formulaic point of reference for the funding of the Scottish Parliament. The Bill sets out no basis for that. I shall explain later why I am not seeking a formula. Amendment No. 293 would strengthen that by requiring

the Secretary of State to certify to the House of Commons, whose consent he will have had to gain to make the payment, that the provision was the basis of the payment.
The clause is one of the central elements of the Bill. The project, if I can still call it that, was sold to the Scottish people on the basis that financial provision from the United Kingdom would not change. We have heard that time and again during the referendum campaign and since. That claim was made in the White Paper and has been repeated many times since by the Secretary of State.
We are talking about the future funding and well-being of Scotland. No other source of funding is made available in the Bill, apart from the £450 million that can be raised by adjusting the standard rate of income tax. We may test that when we come to debate taxation. It is not good enough to leave the issue hanging in the air.
I am surprised that the Bill gives no statutory formulation of the Government's assurances. Instead, clause 61(2) says:
The Secretary of State shall from time to time make payments into the Fund out of money provided by Parliament of such amounts as he may determine.
There is no definition of what "time to time" means. I am sure that the Minister will tell us what he intends, but good intentions in statute are not enough. The phrase could mean anything from several times a year to once every 10 years or beyond.
There is no description of the amounts that will be paid, or any indication of what they are likely to be. There are no criteria for calculating the amounts. Assurances do not answer those points.
Surprisingly, there is also no identification of which Secretary of State the provision applies to. I know that that is not specified anywhere in the Bill, but in this case I imagine that the reference is to the Secretary of State for Scotland, if that office continues after the Scottish Parliament comes into being. However, it could be any Secretary of State in the Westminster Government. The determination of the amount is left to the discretion of the Secretary of State and is not bound around in any way. Nowhere is it specified whether the payment will be annual or what it will relate to, and there is no assurance that it will not be entirely at the whim of the Westminster Government of the day.
We shall be told that such details are not usually put in Bills, but they have not needed to be before. I agree that detailed formulas should not be included in legislation because circumstances and definitions might change. Formula by primary legislation is an inflexible tool, but that does not mean that there should be no criteria in the Bill at all. That is why our amendment advances a basis in the most general terms.
We shall be told that what has gone before will continue and that nothing has changed. That has been the tenor of the comments of the Minister for Home Affairs and Devolution and the Secretary of State for a long time; but a lot will have changed. This is no longer about making financial arrangements and provisions between Ministers and Departments in the same Government; it is about doing so between two different Administrations and sets of politicians, who sometimes might not see eye to eye. There is a substantial difference from what happens now.
We might be told—I suspect that we shall, because we were told it in respect of a similar provision in the Government of Wales Bill—that everything will be


agreed in concordats. The more I look at concordats, the more concerned I become. They appear to be becoming a tool of domestic government, although as far as I know, their existence and future have never been debated or agreed anywhere in Parliament. Until I heard about them in this context, I had thought that they were part of the diplomatic mechanisms of the Foreign Office or of papal intromissions from the Vatican. We are now told that they are to become part of our procedures.

Mr. Tam Dalyell: Is the right hon. Gentleman sure that he is right to lay such emphasis on the problem of different parties? The pressures from politicians in two different institutions, albeit that they are nominally from the same party, might be very great. Such pressures would put a strain on the concordat.

Mr. Ancram: I shall come to that. Concordats might not matter in instances of little political or economic significance such as cultural or sporting affairs. Indeed, they might be an appropriate way to proceed. In this instance, we are talking not about insignificant matters but about an issue of the greatest importance to the future well-being of the people of Scotland and of the United Kingdom as a whole.
Up to now, my gut reaction has been to condemn concordats as not worth the paper they are written on. Nothing has happened to make me change my mind, but because of the regularity of their appearance in our debates, we must examine them more closely. I start with much scepticism, because when I questioned the Secretary of State's Welsh colleagues, who were purveying the same fare, I got some interesting if disconcerting answers. We are told that concordats, which by their nature must be negotiated and agreed with the Scottish Parliament or Welsh assembly, are already being discussed and drafted. Is that the case in Scotland, too? If so, we are being given reassurances on the basis of concordats or agreements that are being reached by members of this Administration but which will have to be operated and endorsed by the Administration of a Scottish Parliament and of this Parliament. Those two situations could be very different, as the hon. Member for Linlithgow (Mr. Dalyell) pointed out. In competitive language, that might politely be described as taking a flier; in more down-to-earth terminology, it is a false prospectus.
Nevertheless, we are asked to risk Scotland's future financial provision on so-called concordats or informal agreements; we need to dig a little deeper. Who will the concordats or agreements be between: the Westminster Parliament and the Scottish Parliament, or the First Minister or Executive of the Scottish Parliament and the Westminster Government? There is a substantial difference in how things might operate. Will they be laid before the respective Parliaments and ratified or remain as private agreements? Will they be enforceable? That is of great importance to the people of Scotland if they are being asked to rely for their funding on them. If so, how and in what jurisdiction? What protection will there be against unilateral breaching of them? What long-term guarantee can they provide to the people of Scotland that the Government's firm undertakings as to the assured nature of their future funding arrangements will be realised?
Those are all crucial questions and on the answer to them hangs the future financial security of a devolved Scotland. It would be one thing to have a binding contract to underpin Barnett and the historic costs and needs base on which it operates; it would be the same if there was some firm parliamentary ratification and endorsement of the agreement, which had the force of law in both parts of the United Kingdom; but it would be something frighteningly different if the agreement or concordat was nothing more than a private agreement between Governments, with nothing to give it legal or parliamentary status. It would be unilaterally breachable and, as I said earlier, it would not be worth the paper it was written on.
There is a more sinister aspect. Opposition Members and Back Benchers on both sides of the House often complain when provision is made in legislation for a plethora of secondary legislation. We all know the arguments—we say that it is time-limited and unamendable, and describe it as the heavy hand of the Executive being brought to bear on parliamentary procedure—but at least it forms part of the parliamentary process. Concordats, on the other hand, avoid Parliament, and if they have effect—I have already expressed doubt about that—it will be effect without benefit of Parliament. They will be the Executive bypassing Parliament, which will be the first step on a road to sideline Parliament altogether. If we allow concordats to develop in that way and to be slipped into the Scottish and Welsh legislation by sleight of hand, we may well come to regret that we have allowed a process to develop that is no longer subject to scrutiny by the House.
We all rather casually refer to this debate as the debate on the Barnett formula, but, on closer examination, it is not. Barnett is not, as is sometimes thought, the whole mechanism for determining levels of spending in Scotland; it is only the determinant of changes to the total. To use a drinking analogy: it is not the beer, but the head on the beer. We must be careful to take that into account. Barnett does not affect the baseline provision; it provides that, where comparable, changes to programmes in England result in equivalent changes in the budget of Scotland, calculated on the basis of population shares.
When in government, we operated both Barnett and the block, occasionally generously, but generally accepting that the two elements reflected the level of need. Since the referendum, and as we warned during the referendum campaign, the principle and practice of the Barnett formula and the whole basis of funding within the component parts of the United Kingdom have come into question. It is interesting that, to a large extent, those questions have come not from my right hon. and hon. Friends and Conservatives in the country, but from Labour sources. We have heard from Labour Members of Parliament demands from the north-east for the formula to be reviewed, because, in the light of devolution, they feel that they are unfairly treated by the way in which the formula operates. The Select Committee on the Treasury called for a needs assessment, to show whether Barnett remained the best way of allocating increases. Lord Barnett himself argued before the Committee that there was a case for a review of the formula.
The fact is that devolution has rubbed the lamp, and the genie of questioning needs has been let out. It will not be easily put back into the lamp, despite the Treasury's bold attempt to do so in its document published on


8 December, because all that it said was that the formula would continue, but would be amended to meet the requirements of devolution. It went on to say that there would be a future annual update of Barnett to take account of mid-year population estimates. I noted with interest that that was to start in 1999–2000, which I calculate is safely after the first assembly elections are out of the way.

Mr. Dalyell: The right hon. Gentleman has forgotten to give credit to those who love the Bill most—the Liberal Democrat party. It was the hon. and learned Member for North-East Fife (Mr. Campbell) who, on 20 December, coined the phrase—he may have used it before:
the ever-escalating size of the block demanded from Westminster".
That comes from someone who is a mad enthusiast for the Bill.

Mr. Ancram: I am grateful to the hon. Gentleman for reminding the Committee of the words of the hon. and learned Member for North-East Fife (Mr. Campbell). I think that what the hon. and learned Gentleman said is correct. However, he was talking about the block as a whole. As I said earlier, two elements are involved—the Barnett formula, which adjusts the top of the block in terms of comparable changes, and the block itself.
We were told in the publication, "A guide to the Scotland Bill" that the formula is regarded as an "administrative arrangement". It will not be prescribed in legislation. It is only an administrative formula, nothing lasting, and certainly nothing in enforceable form, let alone in tablets of stone. That is why I am concerned that the issue should not be left hanging as it is according to the present provisions of the Bill.
At paragraph 12 of its report, the Treasury Committee said:
all Governments would subscribe to the fact that spending should broadly reflect need.
We suddenly find that certain questions are being asked about that. The Government will have to face up to the fact that most of those questions will be asked by Labour Members and that they will be about not just the Barnett formula, but the basis of the core block. In the end, I believe that we would all agree that where one has such blocks within a state, as is the United Kingdom, those blocks must broadly reflect need.

Mr. John Swinney: The right hon. Gentleman is laying great emphasis on the report of the Treasury Committee into the Bartlett formula. I am a new Member, and I am not familiar with the frequency with which individual members of a Select Committee find it necessary to dissociate themselves from their Committee's report, but the hon. Member for Gordon (Mr. Bruce) found it necessary to do so. He made that decision because he considered that the Treasury Committee report was unrepresentative of the subject that had been originally tackled by it. Much store has been put on a document that does not have a great deal of credibility.

Mr. Ancram: I hope that I am not putting store on it, but certain questions are now being asked. When we consider how the core block will be calculated in the future, we must note that it will not be calculated

according to the Barnett formula, which is the assurance given, because there is nothing in the Bill to say how that core block will be calculated.
The fairest way in which such blocks can be calculated—I suspect that it was the basis of the core block in the first place—is by making some reference to relevant need. We have tabled our amendment because the Bill is silent about the calculation.
If someone came to me and asked whether it would be wise to sell his birthright on the basis of an assurance that could not be written in contract—which is what is essentially provided for in the Bill—I should have to advise that person that it would be distinctly unwise to do so. All that we are trying to do is to use the Bill as the contract between the Scottish people and Westminster so that something more concrete is offered than a bland assurance that cannot be put in statute.

Mr. James Wallace: Does the right hon. Gentleman recall that, in June 1995, when he was in government, the then Secretary of State for Scotland, now his noble Friend Lord Lang, was asked in the Select Committee on Scottish Affairs about the need to reappraise the formula used to calculate the block, to guarantee its fairness? He said:
I do not see the need for it at the moment because I am confident that expenditure per head reflects fairly well the relative differences between Scotland and the United Kingdom.
What, if anything, does the right hon. Gentleman believe has changed with regard to the relative need of Scotland and the United Kingdom since the former Secretary of State, who obviously had all the inside information, was able to provide such an answer to the Scottish Affairs Committee?

Mr. Ancram: I am not saying that anything has changed, but if that is correct, let us make sure that that fact is used as a basis in the legislation for making the necessary calculations. That is the only purpose of the amendment.
At the moment, after the Bill has been passed, the hon. and learned Member for Orkney and Shetland (Mr. Wallace) could cite that quotation until he was blue in the face, but if a Government did not want to follow that particular formula, they could say that they were not required to do so by the legislation. We believe that there should be some reference to precisely what the hon. and learned Gentleman has quoted from my noble Friend Lord Lang, in 1995. On that basis, I should have thought that he would want to support the amendment, and I look forward to seeing him doing so when we conclude the debate.
It is important to ask the Government whether they intend to reformulate Barnett, as Lord Barnett has proposed. I know that they will make reformulations on the population basis, but is there an intention to go further than that? The comprehensive spending review that the Government are carrying out is not a needs-based assessment, but it will provide indications of need in various areas. Alongside that, do they intend to examine the relative needs in the United Kingdom? I noticed in note 12 of the Treasury note of 8 December on the Barnett formula that that was not ruled out as a prospect. It was said there that that could be carried out only in consultation with the Scottish Parliament. Will that be considered in the longer term?
Do not those questions underline the fact that the Bill is so silent? It offers no comfort, reassurance or stability—just the transient whim of a Westminster Government and the Secretary of State of the time. Our amendment deliberately does not prescribe, but it provides a hook of reassurance and comfort for people in Scotland that the Westminster Government must have regard to the relative needs of Scotland within the United Kingdom. It creates a discipline that does not currently exist.
Given the assurances that we received during the debates in the autumn, I find it astounding that the Bill leaves Scotland hanging out to dry. Scotland is fobbed off with talk of unenforceable agreements. It is asked to put its faith in all things being perfect in a perfect world. I hope that Scottish Members are too canny to be bought so easily. The Conservative Opposition will not be bought by bland assurances. I ask the Committee to support the amendments, for the reasons that I have given.

Mr. Dalyell: Lord Barnett—Joel Barnett as he then was—was one of my closest friends over 30 years in the House of Commons, when he was the right hon. Member for Heywood and Royton. It must be put on record that it never occurred to Lord Barnett that the so-called Barnett formula to which he gave his name would have any kind of permanency. It was an ephemeral and convenient formula, but no one would have been more astonished than he to have thought that it would be a lasting formula into eternity.
I want to ask, as is my wont, some fairly concise questions. First, what additional taxes can be raised by the Parliament, over and above the specified income tax power, in circumstances in which the Treasury restricts the amount of additional revenue available to the Scottish Parliament as a result of possible future changes to the UK tax structure? There is a lack of clarity on that point. Unless those matters are clarified before the Bill becomes law, businesses and individual taxpayers will be condemned to perpetual uncertainty.
My second question goes back to the civil service. I will be excused if it refers to clause 47, but it particularly refers to any discussions that may take place in relation to tax. I find it hard to see how continued membership of the home civil service will work, when it comes to civil servants arguing about money. Does the United Kingdom head of the service—at present Sir Richard Wilson—have the right of recommendation or any other say in senior appointments? Is there still to be a right of approach to him? Are terms and conditions of service still to be Whitehall-controlled? Depending on the answer to those questions, we can get some idea of how the delicate and doubtless sometimes fraught negotiations on money will take place.
My third question goes back to the reference by the hon. and learned Member for North-East Fife (Mr. Campbell) to
the ever-escalating size of the block demanded from Westminster".
There will be such demands, because expectations have been aroused in Scotland. They will not be fulfilled by new laws, let alone speeches in Holyrood. Our constituents' expectations will be fulfilled by the provision of money. Therefore, heaven help the Members of the Scottish Parliament if they cannot deliver on some

of the expectations that have been aroused. They will ask for more and mor—I would be part of that chorus if I were elected a Member of the Scottish Parliament. Members from all parties will be part of the chorus; they will have no other choice. That is what they are for: their purpose is supposedly to improve the lot—the health, education and housing—of the Scottish people. That can be achieved only through money.
So we come to the nub of the argument. The question is: how long can Members of Parliament who represent English constituencies be expected to vote 24.3 per cent. or 19 per cent.—as some say it is now—more identifiable public expenditure per capita to a part of the United Kingdom where they have no control over the money? That flies in the face of all the laws of human nature, and certainly against the laws of political nature. Do not pretend that those negotiations can be settled by some sort of concordat. There is no chance of achieving amiable solutions—it does not work like that. There will be hard bargaining.
Therefore, it is imperative to establish clarity as to how the formula will work. It is true that, throughout the referendum campaign, it was said as a matter of course that the Barnett formula would continue to apply into the foreseeable future. I wonder how many weeks it will be—and it will be weeks rather than months—before tensions surface. When Holyrood is set up, Members of the Scottish Parliament will realise that many goodies—improved health, housing and education and more resources for local government—are expected of them. However, they will then find that they cannot produce them. This is a vital discussion, and I hope that the Minister will address those very important matters.

Mr. John MacGregor: I follow the general drift of the speech by the hon. Member for Linlithgow (Mr. Dalyell). I must confess that, when I was Chief Secretary from 1985 to 1987, I had my doubts as to whether the Barnett formula would constitute a fair way of settling future expenditure issues in Scotland. Like the hon. Gentleman, I note that Lord Barnett now questions whether it is right to use the formula in that context. My right hon. Friend the Member for Devizes (Mr. Ancram) was entirely right when he described how it operated: we took the Scottish block as a block and, when the negotiations had been completed with the equivalent English Departments, the formula was applied automatically to add to the Scottish block.
That may have been right for the 1970s, but several questions now arise for the 1990s and beyond. The first is whether the formula will assess Scotland's needs properly. I have grave doubts about that. I believe that the need in many regions of England is as great, if not greater, than in Scotland in light of the growth and development of the Scottish economy. Above and beyond that is the question as to whether it is right to take as the base a block that was settled in the 1970s when conditions were very different.
Although I appreciated the convenience of using the Barnett formula in complex public expenditure negotiations, I always wondered whether it was a fair way of approaching the matter. The Labour Government have initiated a new fundamental expenditure review. Such a review should look at the needs and demands of all Departments, assess whether the current expenditure levels are correct, and then make adjustments. If we


cannot do that to the full Scottish block, we will not achieve a proper fundamental expenditure review for Scotland.
Let us take roads expenditure, for example. The present Government are decimating roads expenditure in England. However, let us suppose that they decided, like the previous Government, to spend more on roads in line with the needs in particular English regions. It is well known to people who travel frequently around the United Kingdom that the roads in Scotland are very much better than those in England. [Interruption.] I have travelled around the whole of the United Kingdom and I would love to take Scottish Members to several parts of England where it can take hours to travel six miles. I know many Scots who say that the biggest bottlenecks for the Scottish haulage industry are the M6, the M1 and the M25. I am happy to argue that point for ever because the road system in Scotland is unquestionably better than that in many parts of England.

Ms Roseanna Cunningham: Will the right hon. Gentleman confirm whether he is talking about traffic conditions in England compared with Scotland or the physical state of the roads?

Mr. MacGregor: I am talking about both. I well recall the time that I addressed 200 business men at a business breakfast in Aberdeen. In his introduction, the chairman said that those business men were very glad that I was there, as the Secretary of State for Transport, because it gave them a chance to complain about the state of the roads from Aberdeen to the south of England. The chairman castigated me on the ground that a small number of miles of single-carriageway roads remained between Aberdeen and Paris. I told him that he could promote Aberdeen by highlighting the fact that the roads communications between Paris and Aberdeen were very much better than those in many parts of England, which did not have dual carriageways. There is no doubt that the roads are better in Scotland, but I could use any example. I must come to my point, which has a general application.
When decisions were taken in England to expand substantially the roads programme or any other aspect of departmental expenditure and the conditions were entirely different in Scotland, things would have been different if the Chief Secretary had had the freedom to examine underneath the Scottish budget and point out the relevant differences between roads expenditure in England and Scotland. We could then have argued for that part of the block to be scaled down. There are problems with the block. I suspect that, if there were no prospect of a Scottish Parliament and the current Chief Secretary undertook the fundamental expenditure review properly, he would have to go underneath the Scottish block to examine such issues.
In my day, we talked about zero-based budgeting, which meant that we looked at every aspect of budgeting and then started from scratch. It was never possible to begin to do that with the Scottish block because we could not even look at it. The Barnett formula applied automatically on top of that. I do not think that the present situation is ideal or even satisfactory. I believe that the Barnett formula is out of date and should be re-examined. I agree entirely that the Scottish block should be distributed more on the basis of need according to a proper calculation.
That is the position that I start from: I do not believe that the Barnett formula will provide the correct basis for allocating funding to the Scottish Parliament from the United Kingdom Budget in the years ahead. Like the hon. Member for Linlithgow, I can go even further. There can be no doubt that, even if the same party is in power in Westminster and in Edinburgh, that will be one of the biggest sources of future friction. People will demand to know that the allocation has been calculated fairly on the basis of need. I shall leave aside the points that we will come to later regarding the Public Accounts Committee. There will be great political tension.
My right hon. Friend the Member for Devizes is correct when he says that it is not only the Opposition party in Westminster that will query the formula—many Labour Members, if there is a Labour Government, will draw attention to the disparities to which I refer.
The distribution must be based on a fair assessment of needs. If it is not, and different political parties are in power in Westminster and Edinburgh, the tensions will increase. We will have to move to a system which it is transparently obvious to everyone is based on a fair assessment of need and is properly audited. At the moment, we are long way from achieving that.

Mr. DaIyell: Who will undertake the assessment of needs? In a unified civil service there would be the difficulty of divided loyalties, some civil servants being loyal to the Scottish First Minister. We come back to my question about the home civil service. Does the right hon. Gentleman, with his experience as Chief Secretary to the Treasury—I used to ask the right hon. Gentleman many hostile questions when he was a member of the Treasury Bench—have any comment on the home civil service problem?

Mr. MacGregor: I do not. Nor do I recall all that many hostile questions. Such issues—leaving aside the question of the block—were resolved within a unified Cabinet, reporting to the House and based on a majority party in government. I do not recall the kind of issues that the hon. Gentleman is talking about arising. Of course there were disputes between Ministers with the relevant Departments arguing their case, but I do not think that that is quite what the hon. Gentleman has in mind.
In the new situation, with the Scottish Parliament, given that there will be endless pressures on public expenditure—the hon. Gentleman is right about that—and all sorts of problems being raised by hon. Members here, from their own English regions, we must find a system for the allocation of the budget that both Parliaments consider to be fair. In addition, it should be audited by those in the Westminster Parliament who, at the end of the day, are fundamentally agreeing the sum of money that goes to the Scottish Parliament.
That is a difficult issue and will give rise to great tension. But it is clear that, at present, we do not know how the matter will proceed. If it is to be on the basis of the Barnett formula, that will be questioned and will have to be changed. Somehow or other, if we are not to have precisely the sort of difficulties that the hon. Member for Linlithgow raised, how the allocation is made must be much more transparent. I have been worrying about that for some time, so I am grateful to be able to make this short contribution today. I can imagine a lot of analysis


being done in my constituency and, once there is a separate Scottish Parliament and English Members cannot vote or speak on issues concerning the Scottish Parliament, this matter will be raised time and again.

The Minister for Home Affairs and Devolution, Scottish Office (Mr. Henry McLeish): Like many hon. Members, I respect the right hon. Gentleman's long experience in the House. He said that he had been reflecting on the matter for some time, but has he been reflecting on it for the past 20 years? The key question is: why is the right hon. Gentleman raising the matter now in terms of the devolution settlement? We have had 20 years of Conservative government and the system seemed to work well. Comments throughout the ages could be quoted. The right hon. Gentleman held a pivotal position in that Government, in the Treasury.

Mr. MacGregor: I gave away my position in my opening remarks. When I was Chief Secretary, I queried the Barnett formula, although not on the Floor of the House, for obvious reasons. However, I worried about the Barnett formula even then. As I have said, it is interesting that Lord Barnett himself now feels that the basis of the allocation needs to be updated and reviewed.
It is the introduction of the Scottish Parliament that adds a different dimension and tension to this, and that is why the matter should be considered openly and transparently so that we know on what basis the allocation will be made.

Mr. Wallace: Yet again, Lord Barnett's own querying of the formula has been brought into play. But does the right hon. Gentleman accept that Lord Barnett said that national income per head in Scotland compared with the rest of the United Kingdom was such that he questioned the justification for keeping the present formula? As someone who has had to apply the formula, does the right hon. Gentleman accept that national income per head has nothing to do with the formula, and basically, Lord Barnett forgot what he set up?

Mr. MacGregor: That is probably correct in that the formula was based on other things, but Lord Barnett is right in his general point. The principle of the formula was established in the 1970s and, since then, there has been a substantial change in the relative position of the Scottish economy and the levels of income per head of many Scots compared with a number of English regions. There have been substantial improvements. I argue that, as a result of having a block grant, which at that time was favourable to Scotland, plus the Barnett formula ever since, there has been much higher public expenditure per head in Scotland than in England. That, too, has made a difference to the position in Scotland. Therefore, not just the formula but the size of the grant in the 1970s needs to be reassessed. That is why I say that the assessment should be made on the basis of need. We shall have to consider the allocation to Scotland based on need as a whole, not just the Barnett formula, in the years ahead.

Mr. Swinney: The right hon. Gentleman referred to per capita expenditure in Scotland. There is understandable concern in many quarters, as has been quoted in various

submissions to the House and to the Select Committee on the Treasury, that to carry out such a needs analysis one must consider both sides of the equation, examining some of the expenditure that is defined as unidentified expenditure in the United Kingdom which is often channelled into one part of the United Kingdom—the area around the House and the south-east of England. To get to the nub of the distribution of public expenditure, it must be a transparent exercise to consider expenditure in Scotland and the rest of the United Kingdom.

Mr. MacGregor: I would not disagree with that. That must be considered not only as between England and Scotland, but as between the various English regions. That is where many of the pressures will come from. The English regions will feel themselves disadvantaged. We have already seen examples of that in the House. We must also consider individual departmental expenditure, not just the block as a whole.
That will be one of the crucial areas where we will need changes and greater transparency in future if we are to avoid immense friction. I am still not clear how the Government intend to move ahead during the next few years in deciding the block grant that goes to the Scottish Parliament, and I look forward to hearing what the Minister has to say about that.
However, future Governments will not feel bound by anything this Government do, hence another area of friction and another reason why we need to think carefully about how, rather more transparently and based on need, these allocations are made.

Mr. John McAllion: I sat up and began to take notice when the right hon. Member for South Norfolk (Mr. MacGregor) began his remarks by saying that he was a former Chief Secretary to the Treasury. I thought that surely his contribution would be worth listening to and taking note of. Then he made the ludicrous statement that the road system in Scotland is infinitely superior to that in England. On occasion, I have driven from Scotland to England using both road systems. One knows that one is leaving Scotland and entering England when one leaves the dual carriageway behind and joins a three-lane motorway. That is how we recognise that we are in England. We see little of three-lane motorways in Scotland. Unfortunately, at that point, the right hon. Gentleman lost me, and I suspect, many others listening to the debate.
I do not want to be completely anti-Tory—

Mr. MacGregor: How often has the hon. Gentleman driven down the M74 on to the M6 coming here to the House and found himself constantly held up on the M6 and the M1?

Mr. Dennis Canavan: That is because there are too many cars down here.

Mr. MacGregor: I hope that the hon. Gentleman will not add to them. But that is a sign that the roads in Scotland are much better than in England. There are some good roads in Scotland with few cars on them and there are not many of those in England.

Mr. McAllion: The right hon. Gentleman is mistaken. He is confusing the roads system with the number of


cars on them. My hon. Friend the Member for Falkirk, West (Mr. Canavan) got it in one. There are far too many cars in England because England is infinitely richer than Scotland. That should be considered as part of the background to the debate on Scotland's share of expenditure compared with the rest of the United Kingdom.
One thing I am prepared to agree with—

Mr. Bernard Jenkin: rose—

Mr. McAllion: I was about to agree with something, but there is no chance that I will be able to agree to any intervention by the hon. Gentleman.

Mr. Jenkin: Has the hon. Gentleman ever driven from London to Colchester on the Al2? However few cars there may be in Scotland, the road system has been built to enable people to get from A to B efficiently, particularly between the major population centres. For example, the A9 is a superb road. However many cars we have on the Al2, or on the A 11 to Norwich, the same quality of roads do not seem to be built in East Anglia.

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Mr. McAllion: Nothing would persuade me to drive from London to Colchester, so I shall never discover the quality of the A12.

Mr. Swinney: Both the hon. Gentleman and I have appeared in Dundee's The Courier and Advertiser this week complaining about parts of the A90 around our respective constituencies, and the Minister will be aware of my complaints about the A9 and other roads in my constituency. The point is therefore well made about the difficulties of the road network in Scotland. Perhaps a real debate about the financial position of Scotland would benefit the House.

Mr. McAllion: The hon. Gentleman is absolutely right. Ten years ago the Tory Government set out to put central barriers on the A90 between Dundee and Perth. They said that the work would be completed within 10 years, but it has still not been completed because money has not been spent on roads in Scotland to anything like the extent that it has been spent in England.
I want to agree with something that the Conservative party said in this debate, which is what I have been trying to get to for the last few minutes. I agree with what the right hon. Member for Devizes (Mr. Ancram) suggested in amendment No. 292. The Bill says:
The Secretary of State shall from time to time make payments into the
Consolidated Fund, and the amendment seeks to add the words:
and at least once in every financial year".
I hope that it would be at least once in every financial year. If my hon. Friend the Minister confirms that "from time to time" means that the Scottish fund gets two £14 billion lots in a single year, I shall certainly settle for that and would not oppose my hon. Friend if he chose to accept the amendment.
My purpose in speaking in this debate is to support my amendment (a), to amendment No. 112 tabled by the Liberal Democrats. They have not yet had the chance to

discuss their amendment, which seeks to preserve the Barnett formula. My amendment seeks to honour the commitment that the Labour party made within the Scottish Constitutional Convention that any review of the Barnett formula will be a joint review conducted by the Westminster and Scottish Parliaments.
The final document of the Scottish Constitutional Convention entitled "Scotland's Parliament, Scotland's Right" was agreed to by all members of the convention. Under the heading, "Secure and Stable Finances" on page 27, it says:
We recognise that any formula will need to be jointly reviewed from time to time.
I hope that when my hon. Friend the Minister replies to this debate he will make it clear that any future review of the funding mechanism for a Scottish Parliament will be conducted jointly between the Westminster and Scottish Parliaments, not purely by the Westminster Parliament and then imposed on the Scottish Parliament.

Mr. Wallace: In the spirit of the convention document, may I inform the hon. Gentleman that his amendment distinctly improves ours?

Mr. McAllion: I am grateful to the hon. and learned Gentleman for saying that. Actually, I tabled the amendment on the advice of one of the Clerks, so he should take the credit for it. I provided the purpose of the amendment and he framed it for me.
What lies behind this debate is the perception, particularly among Conservative Members, that Scotland gets an unfair share of public expenditure. We must tackle that argument head on. The right hon. Member for Devizes said that the Barnett formula is really the head on the beer. He is absolutely right, because it can work only at the margin of public expenditure in Scotland. It is a way of allocating increases in identifiable public expenditure; it does not affect the core budget.
The Barnett formula is designed to ensure that Scotland gets less public expenditure in the future. The only reason that it does not work to that effect is that Scotland is losing its population. Had Scotland maintained or increased its population, it would have received less of the share of public expenditure year on year. The Barnett formula is therefore designed to meet what many of its English critics now say.
Under the Barnett formula, Scotland receives 10.66 per cent. of any increase in departmental spending in the UK, whereas Wales gets 6.2 per cent., Northern Ireland 2.9 per cent. and England 80 per cent. If England thinks that Scotland is getting more than its fair share under the Barnett formula, I would be happy to exchange our 10.66 per cent. of the increase in spending for its 80 per cent. When one looks at the figures in the stark, cold light of day, one realises that England is getting a very fair deal under the Barnett formula, and Conservative Members should stop complaining about it.
The real purpose of amendment No. 309 is to complain that no mechanism in the Bill relates public spending to relative need, not only in Scotland but in the rest of the UK. The Opposition want such a mechanism in the Bill because they believe that Scotland receives an unfair share of public expenditure. The right hon. Member for Devizes referred to the Treasury Select Committee report, which implied that Scotland receives an unfair share of


public expenditure within the UK. I warn him that if the Treasury Select Committee report continues to be used to batter the Scottish Parliament proposals, I shall suggest that the Scottish Affairs Select Committee, of which I am a member, conducts its own inquiry into relative spending between Scotland and the rest of the UK. I suspect that we would come up with a very different report from that of the Treasury Select Committee.

Mr. Oliver Heald: Is not the hon. Gentleman prepared to concede that the Treasury Select Committee is dominated by Labour Members, that Lord Barnett is a Labour peer and that the cries of, "Oh, this is unfair to England" come from Labour Members from northern England? Will he acknowledge that Labour Members, not Opposition Members, are raising the issue?

Mr. McAllion: Yes, certain Labour Members have been making that complaint, but neither the Labour Government, to their credit, nor the vast majority of Labour Members who support the Government, are raising the issue. Scottish Members of Parliament are certainly not raising it. Indeed, the only Scottish Member on the Treasury Select Committee dissociated himself from the tone of the report and from its findings—and he is not a Labour Member.
If we are to have such a mechanism, it should look not only at identifiable public expenditure in Scotland and the rest of the United Kingdom but at all public expenditure. The Barnett formula does not deal with spending on agriculture, social security, defence or public administration. The £200 million building being constructed across the road is not included in the formula that compares public spending in Scotland with that in the rest of the UK. We could build four Scottish Parliaments for the price of that block of offices, yet people complain that the Scottish Parliament is wasting money in constructing a new building. It is a ridiculous argument that I hear from Opposition Members.
If we take into consideration all public spending, a different ratio appears, particularly between the south-east of England and the rest of the United Kingdom, including Scotland. If that is the kind of review that the Conservative party wants, I should be happy to support it.
This Saturday sees the establishment of a constitutional convention for the north. The cross-party campaign for a northern assembly is setting up its own constitutional convention along the lines of the Scottish Constitutional Convention, and I hope that it will lead to the same successful conclusion. Campaign members have suggested working with Members of Parliament to expose the notorious hidden subsidies to the south-east of England, such as the uneven allocation of defence contracts to the south-east of England, which goes on all the time. Conservative Members never say that that should be looked into. Another example is the uneven gain from income tax. For the past 18 years, very rich people, the majority of whom live in the south, have enjoyed massive income tax cuts handed out to them by the Government. Those hidden subsidies should be debated, but they rarely are.
I remind hon. Members that, when the Barnett formula was set up, it was meant as a fix to avoid the rows that took place every year within the Cabinet between the

Secretary of State for Scotland and all his colleagues about the spending share that Scotland should get within the Budget. Those rows take place in Cabinet behind closed doors between members of the same party, all of whom were appointed by the same Prime Minister and therefore loyal to that Prime Minister.
Conservative Members may want an annual, open, public and bitter row between the Scottish Parliament in Edinburgh and the Westminster Parliament about Scotland's share of public expenditure, but that would create constant friction between the two Parliaments, and would lead to the Scottish Parliament being distanced from the rest of the United Kingdom. The crazy mechanism that they are trying to establish would achieve the very end that they claim they do not want.

Mr. Eric Forth: Let us accept for a moment the hon. Gentleman's argument that the formula was designed to eliminate such annual squabbles. Does he concede that the establishment of the Scottish Parliament has opened up this issue? It is surely not only legitimate but essential that all of us, north and south of the border, face the issue squarely in the context of the Scottish Parliament and try to produce a new and proper financial basis. Perhaps we should have another formula to eliminate annual squabbles; we cannot assume that the Barnett formula will continue unchanged after the establishment of a Scottish Parliament.

Mr. McAllion: No one is assuming anything. We are dealing with the immediate aftermath of a Scottish Parliament coming into power in 2000. It is not sensible for the Scottish Parliament to be locked into conflict with the Westminster Parliament over its share of the Scottish Office block grant before it has a chance to get its feet under the table and start providing the services for which it is responsible. We are trying to get the Parliament up and running.
In due course, both Parliaments may come to the conclusion that they should review the allocation of public expenditure between Scotland and the rest of the United Kingdom and within Scotland. It should be a joint review, which is the purpose of my amendment. It should also examine all public spending and all subsidies to every corner of the United Kingdom, not just identifiable public expenditure. I do not hear Opposition Members making such points.

Mrs. Eleanor Laing: The hon. Gentleman will not be pleased to hear that I agree with his general argument about the inherent conflict in the Bill. He said that the conflict will continue to get worse. If it is not resolved by the adoption of our amendment, the logical conclusion of his argument is that instead of a devolved Parliament there will be a separate Scotland. Is that what the hon. Gentleman wants?

Mr. McAllion: Nothing in this world is inevitable: I have discovered that after living in it for a very long time. Of course, there will be conflict if the Westminster Parliament tries to take money away from Scotland. If Westminster takes the attitude that Scotland should be punished for having its own Parliament and should have a smaller share of public expenditure, it will pull Scotland down the separatist path. Luckily, the Government do not have that attitude towards Scotland or towards public


expenditure. I have every confidence that under a Labour Government we will have increased public spending in Scotland. I say that with gusto and enthusiasm.

Mr. Wallace: And with a straight face!

Mr. McAllion: I really mean it. I have great hopes that the Government will loosen up expenditure after two years. I am not convinced of the honesty or integrity of Opposition Members when they say that they want public spending to be related to need. They want Scotland to receive a smaller share of public expenditure, and to be punished for daring to have its own Parliament. I shall not support their amendments. I hope that my hon. Friends support my amendment to the amendment tabled by the Liberal Democrats, and that they also support that amendment.

Mr. Wallace: I welcome the fact that the hon. Member for Dundee, East (Mr. McAllion) tabled an amendment to amendment No. 112, because it improves our amendment. He listed a number of items that are not included in the Barnett formula. He omitted the glorified wigwam that is the dome in Greenwich. I do not think that Scotland is getting its percentage Barnett formula share of that venture.

Mr. Ancram: Would the hon. and learned Gentleman tell us how he knows that, whereas we have not managed to get any information about the dome out of the Minister without Portfolio?

Mr. Wallace: That is 1:0 to the right hon. Gentleman; it is a fair point.
When additional expenditure for the health service was announced in October last year, we discovered that the increase for England was not matched by a Barnett formula 10.66 per cent. increase for Scotland. Mid-term increases in expenditure for England do not necessarily trigger off an equivalent increase for Scotland. So the formula is not always strictly applied.
The debate is useful, because it was inevitable that this issue would be raised. I am glad that the comments of the right hon. Member for Devizes (Mr. Ancram) when introducing his amendments were more rational and conciliatory than were the utterings of his party in the period up to the election. It is not right for the right hon. Member for Bromley and Chislehurst (Mr. Forth) to say that devolution has brought this issue to the fore. Under the Conservative Government, plenty of Tory Back Benchers whinged about the amount of money spent in Scotland, and that was not in a devolutionary context, because the Tories were opposed to devolution.
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I found the Conservative party's attitude in the run-up to the election, during the election campaign, and at times during the referendum campaign, distasteful. The Conservative party behaved like the school bully saying, "If you vote for a Scottish Parliament, we will take some of your money away." That was not a particularly helpful approach from a party that prides itself on its commitment to the Union. Surely, it recognises the principle of equalisation not just for Scotland but for all parts of the Union.
I take the point made by the hon. Member for North Essex (Mr. Jenkin). Perhaps the A11 and A12 roads in East Anglia are not particularly good: I do not know, because I have not driven on them for a long time. That perhaps says more about differential spending within England than it does about spending in one part of England compared with Scotland. Expenditure on roads also varies greatly in different parts of Scotland. Local government settlements, which account for a substantial part of public expenditure, show vast differences in England. Under the previous Government, spending per head in Westminster or Wandsworth was massively greater than spending in many places in the north of England. If they were trying to apply the principle of equalisation, they did not succeed.
It is important to emphasise the substantial variations in expenditure within England. It is not always fair or accurate to give an overall picture of spending in England compared with spending in Scotland.

Mr. Dalyell: May I say that I was in no position to bully anyone? There was no bullying. The issue was put in the form of the Bury, North question, which is very serious. Given the new circumstances, how can my hon. Friend the Member for Bury, North (Mr. Chaytor), in that not over-rich Lancashire constituency, justify to his voters for eternity—because that is what we are talking about—the fact that Scotland gets more public expenditure per head than England? In candour, we must at least face up to that issue.

Mr. Wallace: I would never accuse the hon. Gentleman of bullying: that is not his approach. He fairly posed the question, but some Conservative voices were raised that were much more threatening and hectoring. The previous Secretary of State for Scotland used regularly to raise the spectre of what would happen after devolution.
The hon. Gentleman asked how I would explain the position to the hon. Member for Bury, North (Mr. Chaytor). Let me refer perhaps not to Bury but to Barnsley. In the last financial year, the local government settlement was £1,244 per head for Tower Hamlets, £864 per head for Westminster, and £368 per head for Barnsley. That is a greater differential in spending per head than the differential between Scotland and England.
When making an accurate and fair assessment of spending per head in Scotland compared with England, we should take account of the huge geographical differences between Scotland and the rest of the United Kingdom. [Interruption.] The right hon. Member for Bromley and Chislehurst groans, but he cannot run away from the fact that Scotland contains 59 per cent. of the surface area of the United Kingdom and has 10.6 per cent. of the population. [Interruption.] The right hon. Member for Bromley and Chislehurst is making sedentary remarks in a very childish way. He must know that it is more expensive to build a mile of road in the highlands than to build a mile of road in Kent, and that a mile of road in the highlands will inevitably serve fewer people.
Moreover—regrettably—people's health is worse in Scotland than in the rest of the United Kingdom. There are more long-term problems such as heart disease and cancer in Scotland than in England. There are far more pupils in state schools than there are in England, and a higher post-16 staying-on rate. There is less take-up of


private provision, and transport costs are higher. A police car belonging to, for example, the Northern constabulary must travel many more miles to cover its patch than the equivalent in parts of England. All those factors must be taken into account, but there is more to it than that.

Mr. Swinney: There is another aspect of the argument, which the hon. and learned Gentleman may come on to. I am talking about the way in which money is spent in the rest of the United Kingdom, and the fact that Scotland does not receive its fair share—especially in relation to some of the substantial write-offs that followed water privatisation in England and Wales.

Mr. Wallace: There is also consumer expenditure on defence contracts in the south of England, and mortgage interest tax relief benefits England more than Scotland.
The so-called excess has been calculated at about £3.7 billion, but that does not take into account the fact that spending on such matters as agriculture and social security is demand led: the money will be spent, regardless of where the people are. In fact, Scotland has a larger agricultural population than England. I believe that it has been estimated that one of the main contributors to the difference in expenditure per capita between now and the late 1970s, when the Barnett formula was agreed, is the increase in agricultural expenditure, some of which has been European Union driven.
Scotland also has higher local taxation. The average band D council tax in Scotland is £783 in the current financial year, compared with £689 in England. Once we have taken demand-led expenditure and higher local taxation into account, the difference drops from £3.7 billion to £2.7 billion—about £1.45 per person per day. When we take account of Scotland's greater demand for health services, and its related greater demand for social services, the figure falls to £1.9 billion. If that were distributed among everyone else in the United Kingdom, there would be an extra 10p per person per day. That, I think, is a relatively small amount to take account of all the factors, such as geography and weather, that I mentioned earlier.
As I said when I read a quotation to the right hon. Member for Devizes, as recently as June 1995 the former Secretary of State for Scotland—now Lord Lang—thought that the funding formula was pretty fair. I do not think that much has changed since then in terms of relative need. The right hon. Member for South Norfolk (Mr. MacGregor) said that when he was Chief Secretary to the Treasury he had his doubts, but his doubts never prevailed. I suspect that the majority of Cabinet Ministers thought that the formula was fair; if they had not, they would surely have done something about it, but the same arrangement obtained year after year.
The right hon. Member for Devizes asked us to back his amendment, but it does not take matters much further than the Government's proposals. It states that the Government should take need into account, but not that they should do anything about it. Nevertheless, the right hon. Gentleman has a point. I fear—and our amendment addresses this—that, as it stands, the Bill will leave a blank cheque. It could be a cheque for only a fiver: the clause refers to a sum that the Secretary of State
may from time to time determine".

The Minister owes it to us to explain why the proposal is couched in such open terms. There is neither a basis for the original funding formula, nor a basis for any annual variation of it. Our amendment improves on that of the right hon. Member for Devizes by taking the existing grant formula—which already embodies the consideration of need that Lord Lang recently found acceptable—and applies the Barnett formula to it, on an annual basis. If the amendment were accepted, the Bill would establish the way in which the Scottish Parliament should be funded.
We think that any change in the population formula should not be made on an annual basis—on the basis of figures that, at best, can be described as guesstimates—but should follow the census that takes place once every five years. That would provide accurate material on the basis of which to change the formula. In new clause 12, we propose a joint review of the funding formula involving the Scottish Parliament and the House of Commons, to be
completed for implementation in the tenth year following the establishment of the Parliament".

Mr. Swinney: Is that proposal in any way inspired by the hon. and learned Gentleman's concern about the Government's refusal to take on board some of the reasonable arguments about the Scottish Parliament's ability to interview members of the Westminster Government in cross-border discussions about issues of mutual interest?

Mr. Wallace: I think that the new clause was tabled before those debates took place; at any rate, it was quite separate from them. It can, in fact, be directly attributed to the passage from the Scottish Constitutional Convention agreement which was quoted by the hon. Member for Dundee, East. It accepts that the present block grant, the Barnett formula and the tax-varying powers that we shall discuss another day provide a secure and stable basis for the Parliament. That was certainly the arrangement struck between us in the constitutional convention. The convention said:
We recognise that any formula will need to be jointly reviewed from time to time. In time such discussions will undoubtedly lead to a greater transparency in, and understanding of, the economic situation across the different parts of the United Kingdom.
I think that I am supported on that.
We propose that more revenue should come from the tax that is raised in Scotland. We believe that a Treasury grant will still be needed, but if more can be seen to be coining from Scotland itself, so much the better. That, I believe, will lead to transparency and to more accountability. If the Scottish Parliament is to receive a share of the revenue, it will have an incentive to introduce policies in relation to its economic and industrial powers that will increase buoyancy in the Scottish economy. If the amount is to be shared, the United Kingdom Treasury will also benefit. I think that that will lead to a better rapport between Westminster and the Scottish Parliament.
In its publication "Scotland's Parliament", the constitution unit says:
Tax sharing could well come to play a larger part in the financial arrangements if devolution is established throughout the UK. But that is not the case now, and nor is there sufficient confidence yet in the reliability of the figures for tax yields in the territories and


regions to allow it to deliver the benefits in 'fiscal psychology' described. Nevertheless the option of incorporating some element of tax sharing in the financial settlement should be kept open for the future.
We are saying that it should be recognised that, at some stage in the future, a reassessment will be needed. If we move further towards a federal solution, as I think we inevitably will, we shall need some kind of federal exchequer board—a far more transparent mechanism, of the sort that exists in countries where a federal settlement has been reached. This will not necessarily be the last word, but, as things currently stand, it is a good starting point for the Scottish Parliament. Our worry is that nothing in the Bill reflects either the Government's commitment in the White Paper or the commitment in the constitutional convention agreement. I do not accuse the Government of wanting to back off or of bad faith, but, as I asked in a debate on Tuesday: how will these powers stand when they are being exercised by an opponent? There is too much flexibility and opportunity for someone with a much more malevolent will towards the Scottish Parliament to create conflict and tension. Therefore, I hope that tight parameters that will ensure that money is delivered to the Scottish Parliament can be introduced into the Bill.

Mr. Canavan: During the debates in the Scottish Constitutional Convention, I argued for complete fiscal autonomy for the Scottish Parliament, whereby a Scottish Treasury, accountable to the Parliament, would be responsible for the raising of all revenue within Scotland and for paying a certain amount to the United Kingdom Treasury for shared services such as defence and overseas representation. However, I accept that I lost that argument in the convention.
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The White Paper proposal, which was put to the people of Scotland in the referendum, is for the Scottish Parliament to be financed by means of a block grant and of the limited power of raising, or lowering, the basic rate of income tax by up to 3p in the pound. The size of the block grant will presumably be affected by the Barnett formula, which has been around for a long time, as has its author. I recently spoke to Joel—now Lord—Barnett across the road in the gym. I assure the Committee that the good Lord is in good shape, but some concern has been expressed as to whether the Barnett formula is as robust as its maker. The Treasury Committee recently had some things to say about it.
We have to remember that there is no mention of the Barnett formula in the Bill. In fact, there is no specific mention of the formula in any statute and, unless the Liberal Democrat amendment or amendment (a) in my name and that of my hon. Friend the Member for Dundee, East (Mr. McAllion) is accepted, that will remain the case.
The Select Committee said:
The Committee was disappointed that no Government studies have been made in relation to the appropriateness of the Barnett Formula and how it relates to needs … it is time to bring the needs assessment up to date".
The last official needs assessment was made about two decades ago in an interdepartmental study led by the Treasury. The exercise examined the six main services that were, at that time, to be devolved to the proposed Scottish assembly and Welsh assembly. As a matter of

interest, those services were health and personal social services, education, excluding universities, housing, other environmental services, roads and transport, excluding the railways, and law and order and protection services, excluding the police.
The people conducting the study used a large range of "objective factors", including the age distribution of the population, the length of roads, recorded crimes and the number of substandard dwellings, to estimate the cost of providing equivalent service levels in Scotland; they did the same exercise for Wales and Northern Ireland. The overall result was that per capita spending in Scotland would need to be some 16 per cent. higher than in England to provide comparable service levels.
Since then, the definition of public expenditure has evolved considerably and it is difficult to apply those conclusions to the current situation. According to recent reports, per capita spending in some regions of England is considerably higher than that in Scotland. However, do the Government have any plans to update the needs assessment and/or the Barnett formula? If there is any review of the Barnett formula—and I think that Lord Barnett has said that it is not going to survive for ever—it should be a matter for the Scottish Parliament as well as for this Parliament: it should be a matter for negotiation between the Scottish Executive and the UK Government.
That is what amendment (a) tries to ensure. If there is failure to reach agreement, the Scottish Parliament may demand and achieve the sort of fiscal autonomy that I argued for in the Scottish Constitutional Convention.

Mr. Swinney: The financing of the Scottish Parliament is obviously a controversial issue; we have had some controversy already tonight. The hon. and learned Member for Orkney and Shetland (Mr. Wallace) referred to the Scottish Constitutional Convention proposal on assigned revenues. That proposal was formulated in the early days of the convention and goes some way towards the proposals on fiscal autonomy that form the heart of amendments Nos. 77 and 78.
I listened with interest to the hon. Member for Falkirk, West (Mr. Canavan), who made a rational case for fiscal autonomy, which would be in the interests of achieving clarity in the public finances not only of Scotland, but of the UK; fiscal autonomy would address some of the issues about transparency that were raised by the right hon. Member for South Norfolk (Mr. MacGregor). Unless there is a stable solution in the Bill, the issues that we have been discussing will come back time and again.
I concede that, in this debate, the comments of Conservative Members about funding have been more measured; they could not be less measured than the comments of the hon. Member for Billericay (Mrs. Gorman), who has been saying some pretty outrageous things about Scottish public finances in the past few weeks. In the run-up to various elections in recent years, comments have been made about subsidy junkies in Scotland and the Scottish community being heavily subsidised by the rest of the UK. As I have listened to this debate, I have been intrigued by the fact that more and more of those myths are beginning to be tackled by not only people who represent the politics that I support, but Labour and Liberal Democrat Members. They are prepared to challenge some of those myths, which have been presented as the holy grail.
Government expenditure and revenue estimates have also been used to examine the public finances of Scotland. Those estimates are produced annually now and were first introduced as a party political exercise by the former Secretary of State for Scotland, now Lord Lang. Their original purpose was to try to use the Scottish Office and its instruments to show how subsidised Scotland was; it was the most curious piece of political suicide one could find. Those figures are now in the public domain annually.
Some of the details have been rehearsed in the past. The most recent assessment by the Scottish Office suggested a headline deficit for Scotland of more than £7 billion. As with all such analyses, it conveniently ignores the fact that the statistics include a certain share of the general United Kingdom deficit, foisted on Scotland not by decisions by Ministers in Scotland but by the incompetence of various Chancellors of the Exchequer in the past. Additional factors missed from the statistics are the share of oil and privatisation proceeds to which Scotland would undoubtedly be entitled.
The hon. Member for Dundee, East (Mr. McAllion) referred to the assessment of income tax; other aspects of the statistics question whether the lack of transparency in the debate allows us to get to the truth of the public finances of Scotland. That must surely be the basis on which any long-term judgments are made. In that respect, I can comprehend the amendment tabled by the right hon. Member for Devizes (Mr. Ancram), but I do not understand how far forward it takes us. It assesses the issue of need—which we all acknowledge should drive the analysis—but puts no solution in place.
We have had extensive contributions about the Barnett formula. I do not intend to rehearse the issues; nor do I intend to claim any intimate understanding of the origins of Lord Barnett's formula, the intimacies of the Cabinet's discussions or Lord Barnett's current thinking on the issue. I wish to quote from a submission made to the Treasury Select Committee by Professor Arthur Midwinter of the university of Strathclyde. I see an expression on the Secretary of State's face—I am not sure what it means.

The Secretary of State for Scotland (Mr. Donald Dewar): It is one of pleasure.

Mr. Swinney: An expression of pleasure from the Secretary of State? I hope he finds the following words to be of comfort. Professor Midwinter made a number of important remarks. He said:
The Barnett formula remains a simple pragmatic and defensible means of determining Scottish public expenditure.
His next remark relates to the comments made by the right hon. Member for South Norfolk:
Needs assessment models in the public domain are imprecise and rest on political acceptability and judgment more than technical feasibility.
In this analysis, there has to be some acceptance that, however much digging one does through national and regional statistics, some political judgment will ultimately be applied. That is the nature of this debate.

Mr. Dalyell: Political judgment by whom, could we be clear?

Mr. Swinney: I quoted Professor Midwinter's remarks and I would not venture to put words into his mouth.

I think it means that, ultimately, there will be debates and a process of negotiation which some believe can be extracted from the process, but which I do not believe is practical from what we have heard tonight.
Professor Midwinter added:
There is no compelling evidence to suggest that the present levels of public expenditure in Scotland are excessive relative to the rest of the UK.
In the UK context, the sums available for redistribution through any attempt to reduce the Scottish 'excess over needs' as calculated by HM Treasury would be small.
That is a piece of informed analysis which it would be wise for the Committee to remember.
The debate on public finances has to be driven by transparency; that is the why we tabled amendments Nos. 77 and 78. We want the Scottish Parliament to be accountable and responsible for the raising and spending of public finances. No Member of this House could desire anything other than that. However, the Scottish Parliament is being established with very limited flexibility and responsibility. Local authorities in Scotland, by and large, have the power to raise about 15 per cent. of their revenue, whereas the Scottish Parliament will have some degree of discretion in relation to the raising of only 3 per cent. of its revenue. To me, that puts in context the limitations applied by the Government in the Bill.
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A system of financial autonomy for the Scottish Parliament would operate in a simple way, and the hon. Member for Falkirk, West referred to that. Revenues raised in Scotland would be placed under the control of the Scottish Parliament. The last estimate by me and my colleagues of the total revenues raised in Scotland was something like £28 billion in the fiscal year 1996–97. The Scottish Parliament would thereafter be responsible for meeting the costs and agreeing the expenditure of public services within its responsibilities in Scotland, and then for agreeing with Westminster to pay a sum of money in relation to the exercise of reserved powers.

Mr. Wallace: Will the hon. Gentleman give a breakdown of that £28 billion?

Mr. Swinney: The breakdown of the £28 billion was published in a document in advance of the last general election. I have the document, which contains a formidable amount of detail, and I suspect that it is already in the Library. I suspect also that it is in the filing cabinet of the Liberal Democrats in Edinburgh, as I can remember fending off a savage attack—if one can have such a thing from a Liberal Democrat—on this very subject. The information is in the public domain, assumptions and all. Many of the assumptions are provided by the Library, which provides a certain amount of independence to the analysis.

Mr. Ancram: Is it still the hon. Gentleman's assumption that a separate Scotland would receive 90 per cent. of North sea revenue, despite the fact that Professor Neil MacCormick—who, I understand, is a supporter of his party—has questioned that?

Mr. Swinney: The right hon. Gentleman can provide me with the reference. If one applied the principles of


the Geneva convention to the demarcation of boundaries between Scotland and England—a very common assumption which, I suspect, has been debated on many occasions in the House—one would find that the 90 per cent. figure was sustainable.

Mr. Ancram: The hon. Gentleman invited me to provide him with the reference. It comes from a review of a book called "Independence and Devolution: The Legal Implications for Scotland", edited by J. P. Grant, in the Scots Law Times in 1976. Professor MacCormick wrote:
A much needed shaft of light upon the vexed question of present rights and future allocations of rights to exploit the resources of the Continental Shelf is cast by the editor Mr Grant himself.
He wholly demolishes the view, which I for one once held, that the present demarcation of the 'Scottish Area' in the North Sea north of the 55 degrees 50 minutes parallel would continue in the event of Scottish Independence.

Mr. Swinney: That is one legal opinion and, as the right hon. Gentleman will know, one legal opinion is as good as the next until the matter is settled by the courts of the land. I expect Professor MacCormick, as always, to exercise his wise judgment over all the issues.

Mr. Andrew Welsh: Is it not interesting that the Conservatives are willing to give away Scottish assets which are clearly laid out in the Continental Shelf (Jurisdictional) Order 1968—signed by the British Government—which clearly shows where Scottish territorial waters are?

Mr. Swinney: That is a clear explanation from my hon. Friend and a welcome intervention in the debate.
In relation to financial autonomy, the Scottish Parliament would be responsible for paying to Westminster a sum in relation to the reserved powers and the services provided under the reserved powers to Scotland. The result of all this would be to force transparency on the Scottish and Westminster Parliaments—which is where transparency is sadly lacking. Our amendments would advance the debate in a way that the Conservative amendments would not.
Let us consider, as the hon. Member for Dundee, East did, some aspects of hidden public expenditure in south-east England, which contradict the contention that Scotland somehow benefits from formidable additional per capita public expenditure. The millennium dome, for example, will cost more than £700 million; the Jubilee line extension will cost £2.1 billion; the British library has cost £511 million; and the Heathrow to Paddington rail link will cost £440 million. Consider those enormous capital projects in the heart of London and the south-east of England against the background of our debate on financing Scotland.
Our amendments would enable the Scottish Parliament to engage Westminster in a debate on paying for reserved powers and on the amount of resources that will truly be allocated to Scotland. Transparency would undoubtedly benefit if our amendments were made.
The hon. Members for Dundee, East and for Falkirk, West have tabled amendment (a) to amendment No. 112, which would require the Scottish Parliament and the Westminster Parliament to undertake a joint review of Barnett, if that is the future mechanism of financing the

Scottish Parliament. Their amendment would deal with the concern—which I suggested to the hon. and learned Member for Orkney and Shetland—that the dice that are loaded in favour of Westminster in deciding many financial issues will simply be entrenched in the legislation.
There is a very strong case for financial autonomy, to give responsibility and accountability to the Scottish Parliament. I hope that the Minister will have something positive to say about the strong arguments that have been made by hon. Members on both sides of the Committee in favour of financial autonomy, not only in this debate but on many occasions.

Mr. Forth: I began listening to this fascinating debate feeling somewhat depressed, but I have cheered up considerably. I felt depressed because—although such debates are, perhaps inevitably, dominated by hon. Members from north of the border—those who will undoubtedly study the debate will be in danger of getting an entirely wrong slant on the issue.
To set the matter in context, I repeat what I said in an earlier intervention: the tragedy is surely that, for as long as any of us can remember, the issue has only rarely before broken the surface in the United Kingdom. Although we can disagree about or debate the amounts of the transfers or differentials north and south of the border—there is little doubt that they exist—the people of England have largely been content for that to happen because the issue has not been raised and thrust in their face.
Now, with the referendum and legislation to establish a Scottish Parliament, the issue has had to be confronted. Surely we cannot have the possibility of a Scottish Parliament, with all that means, grafted on to long-standing financial arrangements that have gone unchallenged—because they were seen to be a part of a United Kingdom dispensation with which all the people of the United Kingdom were broadly content.

Mr. McAllion: The right hon. Gentleman, probably unintentionally, is misleading the Committee. In the previous Parliament, the convention of using the Barnett formula was seriously challenged by the Conservative party. Michael Forsyth. the then Secretary of State for Scotland, publicly said that the Barnett formula would be changed over his dead body—which is now politically dead. The Conservative Government and the Conservative party challenged the Barnett formula, and the Scottish Conservatives defended it.

Mr. Forth: I must bow to the hon. Gentleman's superior knowledge of what happened inside the Conservative Government. I seem to recall that I spent about nine years in that Government—albeit in the foothills and in a very humble role—but I do not recall a debate on the formula, which I wish had been held and resolved in the way that I should have preferred. However, perhaps that is history; we are now, properly, faced with a debate on allocating funds in the United Kingdom in the context of an imminent Scottish Parliament. That debate is being held against the background of the generally acknowledged fact that there is a difference in the moneys available from the Exchequer to people in Scotland and to people in England.
The common ground that has emerged in this very encouraging debate is on transparency. The hon. Member for Dundee, East (Mr. McAllion) and the hon. and learned Member for Orkney and Shetland (Mr. Wallace) have argued—I agree with them—that it is essential that we have a much better understanding of the origins and expenditure of funds in the United Kingdom, so that, regardless of what we decide to do in the future, our decisions will be based on an appreciation of, and broad agreement on, what is happening.
I support the belief expressed in the debate by hon. Members that the calculation should not necessarily be based on the rather narrow Barnett formulation but should be as wide as possible, and include matters such as agriculture and social security. I have no fear of that happening. As a London Member, I am very conscious that, for example, unemployment in London is now, regrettably, considerably higher than it is in Scotland. Therefore, the impression made in the debate of a deprived and exploited Scotland, which so desperately requires all that extra money, must be balanced with other realities.
I could make some very interesting comparisons between Greater London and Scotland—which have broadly similar populations—and between, for example, their expenditure and generation of tax revenues. You, Mr. Lord, and the Committee will be pleased to hear that I will not go into them now. The hon. Member for North Tayside (Mr. Swinney), however, mentioned capital projects. We all have thoughts one way or the other on those, but they are a reality and should also be factored into our analysis. Those matters form the context of the debate.
My spirits have been raised because of the concept of financial autonomy that was mentioned by the hon. Member for Falkirk, West (Mr. Canavan) and repeated by other hon. Members. If I properly understand the idea, I think that it is very attractive and may well form the basis of the way forward, and that it would receive surprisingly broad agreement. If the hon. Gentleman is proposing that a Scotland with its own Parliament, with all that that means in political and decision-making autonomy, is prepared to countenance raising and being responsible for spending its own revenues within the Scottish context, I welcome the proposal. It would be a very significant step forward.
I made a modest speech in our recent debate on an English Parliament—a matter on which I think that I can extend a hand of friendship to the Liberal Democrats. I believe that the debate that has been initiated on the Scottish Parliament and the Welsh assembly will inevitably have to be extended to resolving representation also in England, perhaps in a federal context.
I draw into the debate on an English Parliament and the developing constitutional arrangements—I am now very much availing myself of your generosity, Mr. Lord—the issue of what we should do with the other place. Although I will not say any more about that, because that is not what the Committee is considering, I believe that all those issues should be combined. The difficulty is that, until now, we have been asked to consider only purely and very narrowly the constitutional implications of a Scottish Parliament, without considering the other implications.

Sir Robert Smith: I think that the right hon. Gentleman's

argument should lead him to support our amendments—which would create a temporary sense of stability while we sort out the other structures that he realises have to be changed, and propose how subsequently to make progress consensually.

Mr. Forth: I understand what the hon. Gentleman is saying and I hope that he does not want to divert me from this rarest of rare moments—I am in a conciliatory mood trying to hold out a hand of friendship to hon. Members on both sides of the Committee. My right hon. Friend the Member for Haltemprice and Howden (Mr. Davis) appears alarmed at my new persona, but I can assure him that it will not last long.
I cannot accept the hon. Gentleman's suggestion, as I do not believe that it would be right to accept the Scottish Parliament on the basis that we accept one part of it and we will deal with the other problems later. If we do not take the opportunity to address the problems now, the moment will pass and we will find them difficult to resolve in the context of a new constitutional arrangement.

Mr. Dalyell: The right hon. Gentleman, who is extending a hand of friendship, also has the hand of friendship of The Scotsman leader writers. He and I attended the debate on the Friday when the hon. Member for Billericay (Mrs. Gorman) raised the issue. How would he propose that the revenue should be raised? Would it be on a purely Scottish basis?

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Mr. Forth: I must admit that my thinking on the matter is not fully developed, although the hon. Gentleman, as ever, raises an extremely important issue.
If we are to contemplate a federal approach—and we are discussing the establishment of regional Parliaments within a United Kingdom federal context—I assume that we will look to either the German or the United States model, where some revenues are raised for federal purposes and allocated to that, and others are raised within different areas and allocated to expenditure on that basis. That would be my starting point, and I assume that it is the basis on which we would seek to proceed. It would fit in well with what I understand to be the proposal by the hon. Member for Falkirk, West for what he described as financial autonomy.
I have described the basis of a way forward that would make the people of England feel much more content with the way in which matters are developing. I fear that, at present, there is a risk that when the people of England realise fully what is happening, and when the issue becomes more developed in their minds, there may be what could be described as an English backlash with English people saying, "Hold on a moment—the Scots seem to be getting everything their own way. They are getting a Parliament and the continuation of existing financial arrangements. Where do the English come into it?" I am trying to use the debate to move the argument forward in a more structured and positive way, broadening it out so that we can address the wider constitutional and financial contexts.
It would appear from what has been said today that that is more possible than ever it seemed in the past. That is why I feel more positive than I did just an hour or two ago. Obviously, I will support the amendments in the name of my right hon. Friend the Member for Devizes


(Mr. Ancram) and I hope that we will move the debate forward in that context. I hope that, having listened to the positive speeches that have been made, the Minister will respond in like terms and see whether he and the Government can find ways forward that will allow us to stay together on the issue and make progress without the dissent that otherwise might arise.

Mrs. Laing: I do not understand how any hon. Member on either side of the Committee can object to the insertion into clause 61 of the words:
having first taken into account the needs of Scotland in relation to the needs of the United Kingdom as a whole".
It must be one of the most benign amendments ever proposed.
Throughout the debate on the Bill and previous debates on devolution during the past several months, the Government have assured us that devolution, the effect of the Bill and the formation of the new Scottish Parliament will benefit the entire United Kingdom. They have said that repeatedly, so why are they resisting the amendment, which clearly and simply states what they have suggested is already inherent in the proposed system of devolution—to take into consideration the needs of the United Kingdom as a whole?
Either the Bill and its consequences are good for the United Kingdom as a whole, in which case the amendment must be acceptable, or they are not, in which case the Government have been misleading those of us who represent parts of the United Kingdom other than Scotland.
I was not in favour of the Bill in the first place. Nor was I in favour of devolution. I was not in favour of a Scottish Parliament being founded in Edinburgh, but, as the Scottish people have spoken through last summer's referendum, I accept—as we all do—that what happens in the House must reflect the will of the people. I want the new Parliament to work. Perhaps it is special pleading—I do not want my constituents in Essex set apart from my friends and family in Scotland. I do not want the House to pass legislation that creates inherent conflicts between different parts of our United Kingdom.
However, the fact is that the proposed system of devolution will not work unless the inherent conflicts are at least reduced—if they cannot be obliterated. I do not believe that that is possible, but at least we can work in a sensible way to try to reduce the conflicts.
I agreed with the hon. Member for Dundee, West (Mr. Ross) when he described the conflict—

Mr. McAllion: It is Dundee, East.

Mrs. Laing: I am sorry. I am quite certain that I have never agreed with the hon. Member for Dundee, West and I am sure that he is delighted about that. However, today I agreed with the hon. Member for Dundee, East (Mr. McAllion) and I am sorry to insult him by saying that. What he said about the conflicts inherent in the system was absolutely correct.

Mr. McAllion: Just for the sake of my own record, the hon. Lady has obviously misunderstood me, as I certainly do not agree with what she has just said. I was arguing

that the Barnett formula would prevent the conflict from taking place. It is the hon. Lady who is arguing that it should be removed.

Mrs. Laing: I appreciate that the hon. Gentleman wants to protect his reputation from my agreeing with him, but I was not saying that. I was saying that if the Committee is acting in the best interests of the entire United Kingdom, no one can possibly object to the amendment.
The hon. Member for Linlithgow (Mr. Dalyell) will be less concerned by the fact that I agree with him. He said quite clearly that when the two Parliaments are up and running and try to decide the annual allocation of taxpayers' money, there will be no chance of their reaching an amiable solution. Of course that must be correct. We know already that Government Departments do not reach amiable solutions, even though they are headed by Secretaries of State who are all colleagues in the Cabinet. They do not reach amiable solutions; they spend weeks arguing about which Department should have the greater part of the available public spending. As that is already inherent in the system, how much more will it be the case between the Parliament here in Westminster and the Parliament in Edinburgh?
We have already referred to the report issued by the Treasury Select Committee after it discussed the Barnett formula. It stated:
There may be good reasons why this formula should continue to be used in the future as it has for the last 20 years, but it is an argument that cannot finally be settled until it is clear that total expenditure, not just the increase, is still being allocated according to relative need. It is important that there should be maximum possible agreement on this in all parts of the UK.
As almost everyone agrees with that, why are the Government resisting an amendment which would simply require the needs of Scotland to be considered in relation to the needs of the United Kingdom as a whole?
As a Member of Parliament, I consider myself a representative of the United Kingdom as a whole. Whatever our allegiances to Scotland, to Essex or to anywhere else, we should all act in the best interests of the United Kingdom as a whole. The dangers of not doing so are considerable.
The Government have said time and again that devolution will safeguard and strengthen the Union. They have used that argument against the Scottish National party Members, who do not want the United Kingdom as a whole to be strengthened. That is fair enough; it is the position on which they were elected. However, the rest of us were elected to safeguard the United Kingdom.
As the Government say that devolution will strengthen and safeguard the Union, they must believe that an amendment that would require the Secretary of State to consider the needs of the whole of the United Kingdom can only be right. By rejecting the amendment, they risk creating the conflicts that the hon. Members for Linlithgow and for Dundee, East so eloquently outlined. As the Government are taking no action today to iron out some of those conflicts, the danger is that the proposed system of devolution will not work and the conflicts that are inherent from the start will increase.
If the system does not work, we shall slide further down the slippery slope to self-government for Scotland. Neither I nor other Conservative Members want that to


happen. If the Government do not want it to happen, they can have no reason for rejecting an amendment which would be in the best interests of the United Kingdom as a whole. If they want to protect the Union, they cannot argue against the amendment.

Mr. Desmond Swayne: I shall reflect briefly on what I regard as the inadequacy of the debate. I wanted to explore some of the ideas of the hon. Members for Falkirk, West (Mr. Canavan) and for North Tayside (Mr. Swinney), but we are precluded from doing so by the limitations imposed by the pre-legislative referendum that both hon. Members supported. The Scottish people were told that financial autonomy was not on offer, so it would be improper to introduce it—although amendments Nos. 77 and 78 represent a manful attempt to do so.
I refer briefly to amendments Nos. 304, 291, 309 and 293. I support the view of my hon. Friend the Member for Epping Forest (Mrs. Laing) that these are elementary questions, although I intend to take rather less time in saying so. I disagree with her in one small respect—her belief that, as Members of Parliament, we should be ambassadors. Our role is not as ambassadors. If she were to refer to Edmund Burke, she would realise that the House of Commons is a deliberative assembly, and not a mere congress of ambassadors.
It is outrageous to be told by the hon. Member for Falkirk, West that the question of financial autonomy was settled by the Scottish Constitutional Convention. That is an insult to my constituents, who were not involved in that process at all.
The clause states:
The Secretary of State shall from time to time make payments
of such amounts as he may determine. That is ridiculous. Given that we are creating a democratically elected institution which will be responsible for disbursing funds, it is vital that we accept amendments Nos. 292 and 295, which would ensure that such payments were made at least once a year and that the Secretary of State could not unilaterally, without reference to the Scottish Parliament, change the amounts to be paid.

Mr. Robert Syms: In a unitary state—as the United Kingdom has been until now—it is inevitable that some areas will be winners and some will be losers in the distribution of resources. Most hon. Members will accept that. They can look across the Chamber and see other hon. Members whose constituencies perhaps receive a different deal, but who have been elected to the House on an equal basis.
The Bill will change the relationships within the United Kingdom; it would have little point if it did not. However, it is silent on the question of money. It presumes that the Barnett formula will continue to apply in some fossilised form. As my right hon. Friend the Member for Devizes (Mr. Ancram) said, we cannot debate devolution without debating resources. Money will be an issue in Scotland and, as time goes by, in England.
From what I have heard in the Committee's consideration of this Bill and of the Government of Wales Bill, I believe that expectations of what the new

constitutional arrangements will bring are unrealistically high. All hon. Members have their favourite cause, believe that there is a pot of gold or have a shopping list but, as the Bill stands, they will be let down.
Money is a critical question. In the years to come, it will be a major subject of debate, and perhaps disagreement, between parts of the United Kingdom. It is not unreasonable to require, as amendment No. 304 would, the Government to use a needs-based formula. No one is presuming an outcome from such a formula.
I am sure that it will be recognised that, as the hon. and learned Member for Orkney and Shetland (Mr. Wallace) said, many of the communities north of the border, especially in the far north and in the central belt, have real needs. We must deal with the matter of money. The Bill is silent about it, but I believe that we shall have to debate it for many years to come.
Another critical point will be the relationship between Westminster and the Scottish Parliament. We have heard much about concordats but, as my right hon. Friend the Member for Devizes said, we do not know whether they will be between Westminster and the Scottish Parliament or between the Government and the Scottish Executive, whether they will be public or private, or whether the House of Commons will debate them. To make any constitutional arrangement work—we do not want disagreement—the worst case scenario has to be tested, but I do not believe that the Bill does that in terms of the relationships within the United Kingdom.
Money will be critical. There are high expectations north of the border. As we shall debate later, the Parliament will be limited to raising income tax by 3p in the pound, which may raise £400 million or £450 million. Local government will be affected, as it is a major area of expenditure, and there may be a great temptation to top-slice. Under the Bill, the levying of business rates will be wholly within the competence of the Scottish Parliament.
I do not believe that the arrangements under the Bill would provide a sound basis for the future. There will be great disagreement north of the border, particularly as local government is squeezed, and there will be debates in this Chamber between England, Scotland, Wales and Northern Ireland over the way in which resources are farmed out. It is critical to debate these matters and I wish that the Government would tackle them now. If they are not dealt with now, they will come back throughout this and future Parliaments.
In the past, it would often have been best if we had reformed local government—I know that we are talking of a different animal today—and local government finance at the same time. All previous Governments have tried to avoid doing so, which has caused great difficulties. The Bill sets up a new constitution and, if we do not tackle the questions of money, needs and grants, they will be a running sore for many years to come.

Mr. Dominic Grieve: It is abundantly clear from the range of amendments tabled that, irrespective of which positions parties or hon. Members have adopted, there is anxiety over the way in which the Bill will operate in practice. Clearly, the matter can be approached in a number of different ways. For once, the way proposed by the Scottish National party has a


certain logic, albeit that if it were introduced, it would effectively mean financial separation and it would cause a ratchet of further problems.
As a Unionist, I believe that we stand and fall together financially. I have always supported the notion that those parts of the United Kingdom that need more financial support should receive it. It really does not matter a bean whether that is the north of Scotland or Wales. As I see myself as a citizen of the United Kingdom, it is right and proper that that should be done.
The difficulty with the Government's approach is that they are burying their head in the sand in terms of the changes that will come about when the Scottish Parliament is set up and in terms of the aging of the Barnett formula in any event. Irrespective of whether a Scottish Parliament is set up, in years to come, that formula is bound to come in for further scrutiny in view of the way in which the United Kingdom is developing.
The amendment simply asserts the principle that all funding should take place on the basis of considering need throughout the United Kingdom. If the relationship between the Scottish Parliament and the Parliament here is to work—it has been my intention to further that relationship during this debate, whatever my anxieties about whether it can be made to work—it will have to set out on the basic premise that on each occasion in the coming funding year, the needs of the United Kingdom as a whole will have to be considered. The idea that that is a device by which Scotland is to be hammered over its financial settlement seems wrong.

Mr. Dalyell: We come back to the question: looked at by whom?

Mr. Grieve: That is a good question. The matter will have to be considered by the Secretary of State and the Government at Westminster in co-operation with Scottish Ministers. Co-operation is implied. As the hon. Gentleman has said on so many occasions, this Bill depends entirely on good will and co-operation. Our anxiety about the legislation, which I know he shares, is that although co-operation and good will are delightful abstracts, in practice, they are often absent. The success of our constitution hitherto has been that it has never catered too much to good will, but it has catered to the realities of power in its distribution.

Mr. Alex Salmond (Banff and Buchan): I see the logic of the hon. Gentleman's position, but if we want to avoid that conflict either we should all accept the Barnett formula, as the two Front-Bench spokesmen have done, or we should accept the argument for fiscal autonomy put forward by the Scottish National party. The hon. Gentleman's argument will not resolve tensions. As soon as the issue is decided—whoever decides it—it will cause argument.

Mr. Grieve: Perhaps I expressed myself badly. If the Barnett formula is providing adequately for needs, let it continue. However, every time we discuss how much money should go to the block grant to Scotland, we should take into account the needs of Scotland in relation to those of the United Kingdom as a whole. We cannot get away from the principle, so it would be wise to restate it in the Bill. It might not help, but it would at least be a step in the right direction to set out what should be considered as the years go by.
The idea that there will not be discussion between Scottish Ministers and Westminster about funding seems unrealistic. Clearly, it is desirable that that should happen, as I am sure the hon. Member for Banff and Buchan (Mr. Salmond) would agree, even if he would prefer a system of fiscal autonomy.
If we are not to have fiscal autonomy, I endorse the amendment. At least it goes some way to spelling out the principles on which people should approach the problem as they will come across it year in and year out.

Mr. McLeish: We have heard some thoughtful and good contributions from both sides of the Committee but, in characteristically robust fashion, the right hon. Member for Bromley and Chislehurst (Mr. Forth) interjected the question of the English backlash. That may be some people's perception, but it is no context for a mature Parliament to discuss a major constitutional change. If we end up with a Scotland-England debate, we shall all lose out. For the benefit of the Committee, we should approach all these issues as most hon. Members have done. Let us not recreate a situation in which, perceived or real, an anti-English or anti-Scottish backlash is being fomented in the Committee. That simply is not useful.

Mr. Wallace: Does the Minister agree that as 15 English Members at most have been present out of 530 or so, that does not suggest that there is much of a backlash?

Mr. McLeish: Hon. Members on both sides who have attended have contributed and that is important.
The amendments focus on the funding arrangements for the Scottish Parliament. They break down into five groups, which I will consider in turn. The first group comprises amendments Nos. 309, 293, 295 and 86 and is concerned with relating the size of grant that Scotland gets from the UK Government to the country's needs.
The argument of the right hon. Member for Devizes (Mr. Ancram) seems to be that only by linking the grant to need will some kind of protection be offered which will prevent the future erosion of Scotland's level of funding. Amendments Nos. 309 and 86 would make it a statutory obligation for the amount of grant paid over by the UK Government to the Scottish Consolidated Fund to be based on Scotland's needs relative to the rest of the UK. I have no argument with that principle. However, the amendments are unnecessary because in practice, under the long-standing system of public expenditure distribution that operates throughout the UK, resources are already allocated on the basis of relative need. That principle applies not only to money allocated to Scotland, Wales and Northern Ireland, but across the whole spectrum of public spending. We have no plans to depart from that fundamental public expenditure principle.
It follows that amendment No. 293, which would place an obligation on the Secretary of State to report to the House that the grant that he was proposing to make was based on relative need, is also unnecessary. Furthermore, the House will already have had the opportunity to consider the level of any proposed grant in the context of its scrutiny of the annual estimates.
Amendment No. 295, which would impose on the Secretary of State an obligation to consult the Scottish Parliament and various bodies before deciding the amount of grant, is also unnecessary and inappropriate. The grant figure will be derived from the assigned budget, which will in turn be calculated in accordance with the block and formula rules. Those will have been published and so the process will be both public and essentially mechanistic. It is precisely to minimise the need for potentially controversial annual negotiations that we have decided to continue with the block and formula arrangements. A requirement to consult at this stage in the process would be at odds with that general approach, although I would fully expect the Scottish Parliament to consult widely about its proposals for allocating the resources available to it.
The second group, amendments Nos. 77 and 78, would change the funding arrangement for the Scottish Parliament and Scottish Administration from one based on current arrangements and involving payment of grant by the UK Government into the Scottish Consolidated Fund to one based on assigned revenues. These amendments propose that Scottish Ministers should be responsible for making payments from the assigned revenues to central Government for provision of services in Scotland relating to reserved matters. A system based on these amendments would involve a significant move away from one of the main principles underlying public finance in the United Kingdom—that Government expenditure should be based not on where taxes are raised, but on where the demand for services is.
Another reason for opposing amendments Nos. 77 and 78 is that, based on the figures for 1995–96—the latest year for which data are available—they would result in Scotland receiving substantially less than under the existing system. Such a settlement would be unfair, because it would not properly reflect Scotland's relative needs. Given the scale of the discrepancy, I do not foresee the situation changing significantly. To ensure the level of funding needed for the provision of services in Scotland, a system would be required to top up Exchequer revenues with a grant from the Westminster Parliament. That would be a retrograde step in comparison with the arrangements proposed in the Bill, introducing complication and uncertainty, and moving away from a tried and tested system. It would be the worst of all worlds.
6.30 pm
The third group of amendments in this selection is amendments Nos. 111 and 112—with amendment (a)—and new clause 12. They would give statutory effect to the Barnett formula and make provision for its review. I fully appreciate the sentiment that lies behind the amendments, so I shall not point out their weaknesses. However, they are misdirected in principle. I hope that I can persuade those who have tabled them not to press them. The aim is to reinforce the Government's commitment to continuing with essentially the same funding arrangements for the Scottish Parliament and Administration as currently apply to the funding of the functions of the Secretary of State for Scotland.
The funding arrangements proposed in the White Paper are intended as a continuation of the existing administrative arrangements, which have served successive Governments well for almost 20 years. As I have said, we are committed to publishing the detailed rules that will continue to govern the allocation of resources to the Scottish Consolidated Fund. We have already published the principles underlying those rules. Any Government wanting to change the rules will have to do so openly and justify their position. We shall publish the rules.

Mr. Wallace: As I said in my speech, I do not question the good faith of this Government. Does the Minister accept that a key test is how such provisions might be exercised by a Government less well disposed to the success of a Scottish Parliament? He says that they would have to publish details of any changes and take the political flak. Amendment No. 112 would involve the Scottish Parliament before any change was made. Why does he not insert some parameters that would prevent a Government with less commitment to a Scottish Parliament from having a blank cheque?

Mr. McLeish: We have seen different Governments over the past 20 years with different views about the allocation of the block and the formula. We feel that the current arrangement will endure. We hope that it is in the best interests of the Scottish Executive and the Westminster Government to come to sensible agreements. It is an enduring and successful arrangement that has worked for 20 years. It offers the best prospects for moving forward.

Mr. Dalyell: Before my hon. Friend leaves the issue of sensible arrangements, may I return to a question that I have asked previously? I find it hard to understand how continued membership of the home civil service would work. Will the head of the United Kingdom civil service, Sir Richard Wilson, have the right of recommendation, or any other say, in senior appointments? Is there still to be a right of approach to him? Are the terms and conditions of service still to be Whitehall-controlled? I know that those questions relate partly to clause 47, but in Treasury negotiations, they are of central importance.

Mr. McLeish: My hon. Friend may recall that when the issue was raised previously, I said that I would write to him. The central issue is that there will be a unified civil service. The current situation will endure into the new settlement.
An administrative arrangement offers significant advantages over statutory provision, particularly in flexibility and adaptability. Those advantages significantly outweigh any theoretical protection that might be provided by giving statutory backing to the Barnett formula or any other aspects of the Scottish Parliament's funding arrangements.
I offer my hon. Friends the Members for Dundee, East (Mr. McAllion) and for Falkirk, West (Mr. Canavan), who tabled amendment (a) to amendment No. 112, the assurance that, as we said in the White Paper, any review of the funding arrangements would need the full involvement of the Scottish Executive and the United Kingdom Government. We are committed to a fair, acceptable, efficient and effective system for funding the


Scottish Parliament. We have made it clear that the Barnett formula is to continue, subject to annual updates to reflect shifts in relative populations—an appropriate arrangement given that the Barnett formula is population based. Population estimates are produced annually.
On a more technical level, amendment No. 292—which constitutes the fourth group of amendments—appears to be aimed at imposing a timetable on the payment of grant by the Secretary of State. It seems reasonable, but it is unnecessary. The detailed arrangements on the timing of payments into the fund by the Secretary of State out of money provided by Parliament will be for agreement between the Secretary of State and Scottish Ministers. There is no need for prescription in the Bill. I hope that the right hon. Member for Devizes will not press the amendment.

Mr. Ancram: I am grateful to the Minister for giving way. I know that he is rushing through his speech to finish in time. He is talking about agreement. I asked him several questions about concordats and agreements. Will the agreement that he is talking about be subject to concordat? Will he answer some of my questions about concordats? This is an important issue.

Mr. McLeish: The grant will not be covered by any concordat. We believe that the principles and the rules surrounding Barnett will be sufficient. We want to ensure that any concordats—I am going wide of the issue—are non-statutory and as public as possible. Such arrangements will be between the Scottish Executive and the UK Government, when the Scottish Executive is established.
The final amendment—No. 294—is difficult to fathom. It would strike out subsection (6), which requires Scottish Ministers to make payments to the Secretary of State in respect of certain receipts. It should be resisted.
I suggest that the lead amendment should be withdrawn and that the others should not be pressed. If not, I ask the Committee to vote them down.

Mr. Ancram: We have had an important and far-reaching debate on an important and far-reaching subject. I welcome the fact that so many hon. Members have spoken. I found the Minister's answers disappointing. I said that amendment No. 294 was probing, tabled so that he could explain a provision that I did not understand. He said that he found the amendment difficult to understand. I hope that we can return to that, because it is important.
My right hon.Friend the Member for Bromley and Chislehurst (Mr. Forth) was right to try to set the issue in a broader context. One of the difficulties that we have on constitutional reform is that the Government are approaching it piecemeal. I agree with my right hon. Friend that we should have a more comprehensive approach.
I am also grateful to my hon. Friends the Members for Epping Forest (Mrs. Laing), for New Forest, West (Mr. Swayne), for Poole (Mr. Syms) and for Beaconsfield (Mr. Grieve). They strongly supported our amendment and reinforced my initial arguments. Our amendment is constructive. The principle was accepted by almost everyone who spoke except the Minister. I am

disappointed that, once again, his reaction to a constructive amendment was resist, resist, resist because it looks weak to do otherwise. I had hoped that such a constructive amendment would be given greater consideration—if only a promise by the Minister to go away and look at it and perhaps come back with an alternative. I am sorry that he did not.
It is depressing that so few Scottish Labour Members felt that the issue was of sufficient importance to attend the debate. One or two faithful Scottish Labour Members have been present, but the majority of them were nowhere to be seen. The issue will affect all their constituents.

Mr. Canavan: What about the Scottish Tory Members?

Mr. Ancram: If there were Scottish Tories, they would have contributed to the debate. They would know that their constituents' prosperity depended on the issue. We have learnt from the empty Labour Benches what Scottish Labour Members think about the future funding of their constituencies. Labour Members from the north-east were not even seen. I suspect that the Whips were working hard to keep them away in case they embarrassed the Minister.
The Minister's argument is difficult to accept. He says that the current administrative arrangements have worked well for the past 20 years, so we should keep them in place. It is not as if things were not changing. The Secretary of State tells us that the whole devolutionary project is historic, fundamental and exciting, yet the Minister says that we need not put anything into the Bill because nothing will have changed. A lot will have changed. The main thing will be that instead of a partnership within the United Kingdom, under one unitary Government whose members can get together and share problems and the resources to solve them, we shall have two separate Administrations who will not necessarily see eye to eye. That situation is totally different from the present one and the Minister has failed to address that.
The Minister said that we should not move away from a tried and tested system, but we are moving away from a tried and tested constitutional system in the Bill by setting up a Scottish Parliament. Nothing on the financial side recognises that fact. Listening to him, I found no comfort on the points that I raised.
The hon. and learned Member for Orkney and Shetland (Mr. Wallace) underlined my case when he said that Scotland has special needs. If it does, let us have a needs relationship built into the statute so that it can be tested year on year to ensure that funds and resources are fairly produced. My right hon. Friend the Member for South Norfolk (Mr. MacGregor), with his enormous experience, was right. We are looking for a fair, transparent system which will avoid constant friction between a Scottish Parliament and the Westminster Parliament. That is the key to what we are discussing.
I do not expect the Scottish National party to join us in the Lobby tonight. It will not support any amendment likely to make the Scottish Parliament work. The nationalists want it to fail because that is how they can achieve their ultimate goal of an independent Scotland. If the amendment is constructive, they will not be with us.
If we wanted proof of future confrontations, we had only to listen to the speech of the hon. Member for


Dundee, East (Mr. McAllion). He gave us an example, if we needed one, of what matters will be like unless something more is written into the Bill. He abused English Members; he was rude about them and insulted them. He told us that we did not understand Scotland. We heard the authentic voice of the confrontation that is going to come unless some safeguard is built into the Bill. I have heard nothing to justify withdrawing the amendment. On that basis, I ask my hon. Friends to support it.

Question put, That the amendment be made:—

The Committee divided: Ayes 113, Noes 304.

Division No. 169]
[6.41 pm


AYES


Ainsworth, Peter (E Surrey)
Johnson Smith,


Amess, David
Rt Hon Sir Geoffrey


Ancram, Rt Hon Michael
Key, Robert


Arbuthnot, James
King, Rt Hon Tom (Bridgwater)


Atkinson, David (Bour'mth E)
Kirkbride, Miss Julie


Atkinson, Peter (Hexham)
Laing, Mrs Eleanor


Beresford, Sir Paul
Lait, Mrs Jacqui


Blunt, Crispin
Lansley, Andrew


Boswell, Tim
Leigh, Edward


Brady, Graham
Letwin, Oliver


Brazier, Julian
Lewis, Dr Julian (New Forest E)


Brooke, Rt Hon Peter
Lidington, David


Bruce, Ian (S Dorset)
Loughton, Tim


Butterfill, John
Luff, Peter


Chapman, Sir Sydney
Lyell, Rt Hon Sir Nicholas


(Chipping Barnet)
MacGregor, Rt Hon John


Chope, Christopher
McIntosh, Miss Anne


Clappison, James
MacKay, Andrew


Collins, Tim
Maclean, Rt Hon David


Cormack, Sir Patrick
McLoughlin, Patrick


Cran, James
Malins, Humfrey


Curry, Rt Hon David
Mawhinney, Rt Hon Sir Brian


Davis, Rt Hon David (Haltemprice)
May, Mrs Theresa


Day, Stephen
Moss, Malcolm


Dorrell, Rt Hon Stephen
Norman, Archie


Duncan, Alan
Ottaway, Richard


Duncan Smith, Iain
Page, Richard


Emery, Rt Hon Sir Peter
Paice, James


Evans, Nigel
Paterson, Owen


Faber, David
Prior, David


Fabricant, Michael
Randall, John


Fallon, Michael
Redwood, Rt Hon John


Flight, Howard
Robathan, Andrew


Forth, Rt Hon Eric
Robertson, Laurence (Tewk'b'ry)


Fox, Dr Liam
Ruffley, David


Fraser, Christopher
St Aubyn, Nick


Gale, Roger
Sayeed, Jonathan


Garnier, Edward
Shephard, Rt Hon Mrs Gillian


Gibb, Nick
Shepherd, Richard


Gill, Christopher
Simpson, Keith (Mid-Norfolk)


Gillan, Mrs Cheryl
Spelman, Mrs Caroline


Goodlad, Rt Hon Sir Alastair
Spring, Richard


Gorman, Mrs Teresa
Stanley, Rt Hon Sir John


Green, Damian
Swayne, Desmond


Greenway, John
Syms, Robert


Grieve, Dominic
Tapsell, Sir Peter


Hamilton, Rt Hon Sir Archie
Taylor, Ian (Esher & Walton)


Hammond, Philip
Townend, John


Hayes, John
Tredinnick, David


Heathcoat-Amory, Rt Hon David
Tyrie, Andrew


Horam, John
Waterson, Nigel


Howard, Rt Hon Michael
Wells, Bowen


Howarth, Gerald (Aldershot)
Whitney, Sir Raymond


Hunter, Andrew
Whittingdale, John


Jenkin, Bernard
Widdecombe, Rt Hon Miss Ann





Willetts, David
Young, Rt Hon Sir George


Wilshire, David
Tellers for the Ayes:


Winterton, Mrs Ann (Congleton)
Mr. Oliver Heald and Sir David Madel.


Yeo, Tim





NOES


Abbott, Ms Diane
Darling, Rt Hon Alistair


Ainsworth, Robert (Cov'try NE)
Darvill, Keith


Allen, Graham
Davey, Valerie (Bristol W)


Anderson, Donald (Swansea E)
Davidson, Ian


Anderson, Janet (Rossendale)
Davies, Geraint (Croydon C)


Armstrong, Ms Hilary
Davis, Terry (B'ham Hodge H)


Ashton, Joe
Dawson, Hilton



Atkins, Charlotte
Dean, Mrs Janet


Austin, John
Dewar, Rt Hon Donald


Barnes, Harry
Dismore, Andrew


Barron, Kevin
Donohoe, Brian H


Begg, Miss Anne
Doran, Frank


Benn, Rt Hon Tony
Dowd, Jim


Bennett, Andrew F
Drew, David


Benton, Joe
Drown, Ms Julia


Bermingham, Gerald
Dunwoody, Mrs Gwyneth


Berry, Roger
Eagle, Angela (Wallasey)


Best, Harold
Efford, Clive


Betts, Clive
Ennis, Jeff


Blizzard, Bob
Etherington, Bill


Blunkett, Rt Hon David
Ewing, Mrs Margaret


Boateng, Paul
Fearn, Ronnie


Bradshaw, Ben
Fitzpatrick, Jim


Brown, Rt Hon Nick (Newcastle E)
Fitzsimons, Lorna


Brown, Russell (Dumfries)
Follett, Barbara


Buck, Ms Karen
Foster, Rt Hon Derek


Burden, Richard
Foster, Don (Bath)


Burgon, Colin
Foster, Michael Jabez (Hastings)


Burstow, Paul
Foster, Michael J (Worcester)


Butler, Mrs Christine
Galloway, George


Byers, Stephen
Gapes, Mike


Caborn, Richard
Gardiner, Barry


Campbell, Alan (Tynemouth)
George, Andrew (St Ives)


Campbell, Mrs Anne (C'bridge)
Gerrard, Neil


Campbell, Menzies (NE Fife)
Gibson, Dr Ian


Campbell, Ronnie (Blyth V)
Godsiff, Roger


Canavan, Dennis
Goggins, Paul


Caplin, Ivor
Golding, Mrs Llin


Casale, Roger
Gordon, Mrs Eileen


Caton, Martin
Gorrie, Donald


Cawsey, Ian
Griffiths, Nigel (Edinburgh S)


Chapman, Ben (Wirral S)
Griffiths, Win (Bridgend)


Chaytor, David
Grogan, John


Chidgey, David
Hall, Mike (Weaver Vale)


Chisholm, Malcolm
Hall, Patrick (Bedford)


Clark, Rt Hon Dr David (S Shields)
Hamilton, Fabian (Leeds NE)


Clark, Dr Lynda
Hancock, Mike


(Edinburgh Pentlands)
Hanson, David


Clark, Paul (Gillingham)
Harris, Dr Evan


Clarke, Rt Hon Tom (Coatbridge)
Healey, John


Clelland, David
Heath, David (Somerton & Frome)


Coaker, Vernon
Henderson, Doug (Newcastle N)



Coffey, Ms Ann
Hepburn, Stephen


Coleman, Iain
Hesford, Stephen


Colman, Tony
Hill, Keith


Connarty, Michael
Hinchliffe, David



Cook, Frank (Stockton N)
Hoey, Kate


Cooper, Yvette
Hoon, Geoffrey


Corbett, Robin
Hope, Phil


Corbyn, Jeremy
Hopkins, Kelvin



Corston, Ms Jean
Howarth, Alan (Newport E)


Cotter, Brian
Howarth, George (Knowsley N)


Cryer, Mrs Ann (Keighley)
Hoyle, Lindsay


Cryer, John (Hornchurch)
Hughes, Ms Beverley (Stretford)


Cunningham, Rt Hon Dr John
Hughes, Simon (Southwark N)


(Copeland)
Hurst, Alan


Cunningham, Ms Roseanna
Hutton, John


(Perth)
Illsley, Eric


Dalyell, Tarm
Ingram, Adam






Jackson, Ms Glenda (Hampstead)
O'Brien, Bill (Normanton)


Jackson, Helen (Hillsborough)
O'Brien, Mike (N Warks)


Jenkins, Brian
Olner, Bill


Johnson, Alan (Hull W& Hessle)
Öpik, Lembit


Johnson, Miss Melanie
Organ, Mrs Diana


(Perth)
Osborne, Ms Sandra


Jones, Barry (Alyn & Deeside)
Palmer, Dr Nick


Jones, Helen (Warrington N)
Pearson, Ian


Jones, Ms Jenny
Pendry, Tom


(Wolverh'ton SW)
Pickthall, Colin


Jones, Dr Lynne (Selly Oak)
Pike, Peter L


Jones, Martyn (Clwyd S)
Plaskitt, James


Kaufman, Rt Hon Gerald
Pollard, Kerry


Keeble, Ms Sally
Pond, Chris


Keen, Alan (Feltham & Heston)
Pope, Greg


Keen, Ann (Brentford & Isleworth)
Powell, Sir Raymond


Kelly, Ms Ruth
Prentice, Gordon (Pendle)


Kemp, Fraser
Prosser, Gwyn


Kennedy, Charles (Ross Skye)
Purchase, Ken


Khabra, Piara S
Quin, Ms Joyce


King, Andy (Rugby & Kenilworth)
Quinn, Lawrie


King, Ms Oona (Bethnal Green)
Rammell, Bill


Kingham, Ms Tess
Rapson, Syd


Kirkwood, Archy
Raynsford, Nick


Ladyman, Dr Stephen
Rendel, David


Laxton, Bob
Robinson, Geoffrey (Cov'try NW)


Lepper, David
Rooker, Jeff


Leslie, Christopher
Rooney, Terry


Levitt, Tom
Ross, Ernie (Dundee W)


Lewis, Ivan (Bury S)
Rowlands, Ted


Livingstone, Ken
Roy, Frank


Lock, David
Ruane, Chris


Love, Andrew
Ruddock, Ms Joan


McAllion, John
Russell, Bob (Colchester)


McAvoy, Thomas
Ryan, Ms Joan


McCabe, Steve
Salmond, Alex


McCafferty, Ms Chris
Salter, Martin


McCartney, Ian (Makerfield)
Savidge, Malcolm


McDonagh, Siobhain
Sawford, Phil


Macdonald, Calum
Sheerman, Barry


McFall, John
Sheldon, Rt Hon Robert


McGuire, Mrs Anne
Skinner, Dennis


McIsaac, Shona
Smith, Rt Hon Andrew (Oxford E)


McKenna, Mrs Rosemary
Smith, Angela (Basildon)


Mackinlay, Andrew
Smith, Rt Hon Chris (Islington S)


McLeish, Henry
Smith, Miss Geraldine


McNamara, Kevin
(Morecambe & Lunesdale)


McNulty, Tony
Smith, Jacqui (Redditch)


MacShane, Denis
Smith, Llew (Blaenau Gwent)


Mactaggart, Fiona
Smith, Sir Robert (W Ab'd'ns)


McWalter, Tony
Soley, Clive



Mallaber, Judy
Spellar, John


Marsden, Paul (Shrewsbury)
Squire, Ms Rachel


Marshall, David (Shettleston)
Starkey, Dr Phyllis


Marshall, Jim (Leicester S)
Stevenson, George


Marshall-Andrews, Robert
Stewart, David (Inverness E)


Meacher, Rt Hon Michael
Stinchcombe, Paul


Meale, Alan
Stott, Roger


Merron, Gillian
Strang, Rt Hon Dr Gavin


Michie, Bill (Shef'ld Heeley)
Stringer, Graham


Miller, Andrew
Stuart, Ms Gisela


Mitchell, Austin
Swinney, John


Moffatt, Laura
Taylor, Rt Hon Mrs Ann


Moore, Michael
(Dewsbury)


Moran, Ms Margaret
Taylor, David (NW Leics)


Morgan, Alasdair (Galloway)
Temple-Morris, Peter


Morgan, Ms Julie (Cardiff N)
Thomas, Gareth (Clwyd W)


Morgan, Rhodri (Cardiff W)
Thomas, Gareth R (Harrow W)


Morley, Elliot
Timms, Stephen


Morris, Ms Estelle (B'ham Yardley)
Tipping, Paddy


Morris, Rt Hon John (Aberavon)
Todd, Mark


Mountford, Kali
Tonge, Dr Jenny


Mudie, George
Touhig, Don


Mullin, Chris
Trickett, Jon


Naysmith, Dr Doug
Truswell, Paul


Norris, Dan
Turner, Dr George (NW Norfolk)





Vaz, Keith
Wills, Michael


Vis, Dr Rudi
Winnick, David


Wallace, James
Winterton, Ms Rosie (Doncaster C)


Walley, Ms Joan
Woolas, Phil


Wareing, Robert N
Worthington, Tony


Watts, David
Wray, James



Wright, Anthony D (Gt Yarmouth)


Welsh, Andrew
Wright, Dr Tony (Cannock)


White, Brian
Wyatt, Derek



Whitehead, Dr Alan



Wicks, Malcolm
Tellers for the Noes:


Williams, Alan W (E Carmarthen)
Mr. David Jamieson and Ms Bridget Prentice.


Willis, Phil

Question accordingly negatived.

Amendment proposed: No. 77, in page 26, line 4, leave out from 'shall' to end of line 6 and insert
`in respect of each financial year make payments into the Fund equalling the revenue raised by the Exchequer in Scotland and in the Scottish sector of the United Kingdom continental shelf.'.—[Mr. Swinney.]

Question put, That the amendment be made:—

The Committee divided: Ayes 4, Noes 276.

Division No. 170]
[6.53 pm


AYES


Cunningham, Ms Roseanna
Swinney, John


(Perth)
Tellers for the Ayes:


Ewing, Mrs Margaret
Mr. Andrew Welsh and Mr. Alasdair Morgan.


Salmond, Alex





NOES


Abbott, Ms Diane
Chisholm, Malcolm


Ainsworth, Robert (Cov'try NE)
Clark, Rt Hon Dr David (S Shields)


Allen, Graham
Clark, Dr Lynda


Anderson, Donald (Swansea E)
(Edinburgh Pentlands)


Anderson, Janet (Rossendale)

Clark, Paul (Gillingham)


Armstrong, Ms Hilary
Clarke, Eric (Midlothian)


Atkins, Charlotte
Clarke, Rt Hon Tom (Coatbridge)


Austin, John
Clelland, David


Barnes, Harry
Coaker, Vernon


Barron, Kevin
Coffey, Ms Ann


Begg, Miss Anne
Coleman, Iain


Benn, Rt Hon Tony
Colman, Tony


Benton, Joe
Connarty, Michael


Bermingham, Gerald
Cook, Frank (Stockton N)


Berry, Roger
Cooper, Yvette


Best, Harold
Corbett, Robin


Betts, Clive
Corbyn, Jeremy


Blizzard, Bob
Corston, Ms Jean


Blunkett, Rt Hon David
Cotter, Brian


Boateng, Paul
Cryer, John (Hornchurch)


Bradshaw, Ben
Dalyell, Tam


Brown, Rt Hon Nick (Newcastle E)
Darling, Rt Hon Alistair


Brown, Russell (Dumfries)
Darvill, Keith


Buck, Ms Karen
Davey, Valerie (Bristol W)


Burden, Richard
Davidson, Ian


Burstow, Paul
Davies, Geraint (Croydon C)


Butler, Mrs Christine
Davis, Terry (B'ham Hodge H)


Byers, Stephen
Dawson, Hilton


Campbell, Alan (Tynemouth)
Dean, Mrs Janet


Campbell, Mrs Anne (C'bridge)
Dewar, Rt Hon Donald


Campbell, Menzies (NE Fife)
Dismore, Andrew


Campbell, Ronnie (Blyth V)
Donohoe, Brian H


Canavan, Dennis
Doran, Frank


Caplin, Ivor
Dowd, Jim


Casale, Roger
Drew, David


Caton, Martin
Drown, Ms Julia


Cawsey, Ian
Dunwoody, Mrs Gwyneth


Chapman, Ben (Wirral S)
Eagle, Angela (Wallasey)


Chaytor, David
Efford, Clive


Chidgey, David
Ennis, Jeff






Etherington, Bill
Livingstone, Ken


Fearn, Ronnie
Lock, David


Fitzpatrick, Jim
Love, Andrew


Fitzsimons, Lorna
McAllion, John


Follett, Barbara
McAvoy, Thomas


Foster, Rt Hon Derek
McCabe, Steve


Foster, Don (Bath)
McCafferty, Ms Chris


Foster, Michael Jabez (Hastings)
McDonagh, Siobhain


Foster, Michael J (Worcester)
Macdonald, Calum


Galloway, George
McFall, John


Gapes, Mike
McGuire, Mrs Anne


Gardiner, Barry
McIsaac, Shona


George, Andrew (St Ives)
McKenna, Mrs Rosemary


Gerrard, Neil
Mackinlay, Andrew


Gibson, Dr Ian
McLeish, Henry


Godsiff, Roger
McNulty, Tony


Goggins, Paul
MacShane, Denis


Golding, Mrs Llin
Mactaggart, Fiona


Gordon, Mrs Eileen
McWalter, Tony


Gorrie, Donald
Mallaber, Judy


Griffiths, Nigel (Edinburgh S)
Marsden, Paul (Shrewsbury)


Griffiths, Win (Bridgend)
Marshall, David (Shettleston)


Grogan, John
Marshall, Jim (Leicester S)


Hall, Mike (Weaver Vale)
Marshall-Andrews, Robert


Hall, Patrick (Bedford)
Meacher, Rt Hon Michael


Hamilton, Fabian (Leeds NE)
Meale, Alan


Hancock, Mike
Merron, Gillian


Hanson, David
Michie, Bill (Shef'ld Heeley)


Harris, Dr Evan
Miller, Andrew


Healey, John
Mitchell, Austin


Heath, David (Somerton & Frome)
Moffatt, Laura


Henderson, Doug (Newcastle N)
Moore, Michael


Hepburn, Stephen
Moran, Ms Margaret


Hesford, Stephen
Morley, Elliot


Hill, Keith
Morris, Ms Estelle (B'ham Yardley)


Hoey, Kate
Morris, Rt Hon John (Aberavon)


Hoon, Geoffrey
Mullin, Chris


Hope, Phil
Naysmith, Dr Doug


Hopkins, Kelvin
Norris, Dan


Howarth, Alan (Newport E)
O'Brien, Bill (Normanton)


Howarth, George (Knowsley N)
O'Brien, Mike (N Warks)


Hoyle, Lindsay
Olner, Bill


Hughes, Ms Beverley (Stretford)
Öpik, Lembit


Hughes, Simon (Southwark N)
Organ, Mrs Diana


Hurst, Alan
Osborne, Ms Sandra


Hutton, John
Palmer, Dr Nick


Ingram, Adam
Pearson, Ian


Jackson, Ms Glenda (Hampstead)
Pendry, Tom


Jackson, Helen (Hillsborough)
Pickthall, Colin


Jenkins, Brian
Pike, Peter L


Johnson, Alan (Hull W & Hessle)
Plaskitt, James


Johnson, Miss Melanie
Pollard, Kerry


(Welwyn Hatfield)
Pond, Chris


Jones, Barry (Alyn & Deeside)
Pope, Greg


Jones, Helen (Warrington N)
Powell, Sir Raymond


Jones, Ms Jenny
Prentice, Gordon (Pendle)


(Wolverh'ton SW)
Prosser, Gwyn


Jones, Dr Lynne (Selly Oak)
Purchase, Ken


Jones, Martyn (Clwyd S)
Quin, Ms Joyce


Kaufman, Rt Hon Gerald
Rammell, Bill


Keeble, Ms Sally
Rapson, Syd


Keen, Alan (Feltham & Heston)
Raynsford, Nick


Keen, Ann (Brentford & Isleworth)
Rendel, David


Kelly, Ms Ruth
Robinson, Geoffrey (Cov'try NW)


Kemp, Fraser
Rooker, Jeff


Kennedy, Charles (Ross Skye)
Rooney, Terry


King, Andy (Rugby & Kenilworth)
Ross, Ernie (Dundee W)


King, Ms Oona (Bethnal Green)
Rowlands, Ted


Kingham, Ms Tess
Roy, Frank


Kirkwood, Archy
Ruddock, Ms Joan



Ladyman, Dr Stephen
Russell, Bob (Colchester)


Laxton, Bob
Ryan, Ms Joan


Lepper, David
Salter, Martin


Leslie, Christopher
Savidge, Malcolm


Levitt, Tom
Sawford, Phil


Lewis, Ivan (Bury S)
Sheerman, Barry





Sheldon, Rt Hon Robert
Todd, Mark


Skinner, Dennis
Tonge, Dr Jenny


Smith, Angela (Basildon)
Touhig, Don


Smith, Rt Hon Chris (Islington S)
Truswell, Paul


Smith, Miss Geraldine
Turner, Dr George (NW Norfolk)


(Morecambe & Lunesdale)
Vaz, Keith


Smith, Jacqui (Redditch)
Vis, Dr Rudi


Smith, Llew (Blaenau Gwent)
Wallace, James


Smith, Sir Robert (W Ab'd'ns)
Walley, Ms Joan


Soley, Clive
Wareing, Robert N


Spellar, John
Watts, David


Squire, Ms Rachel
White, Brian



Whitehead, Dr Alan


Starkey, Dr Phyllis
Wicks, Malcolm


Stewart, David (Inverness E)
Williams, Alan W (E Carmarthen)


Stinchcombe, Paul
Willis Phil


Strang, Rt Hon Dr Gavin
Winnick, David


Stringer, Graham
Woolas, Phil


Stuart, Ms Gisela
Worthington, Tony


Taylor, Rt Hon Mrs Ann
Wray, James


(Dewsbury)
Wright, Anthony D (Gt Yarmouth)


Taylor, David (NW Leics)
Wright, Dr Tony (Cannock)


Temple-Morris, Peter
Wyatt, Derek


Thomas, Gareth (Clwyd W)



Thomas, Gareth R (Harrow W)
Tellers for the Noes:


Timms, Stephen
Ms Bridget Prentice and Mr. David Jamieson.


Tipping, Paddy

Question accordingly negatived.

Mr. Dalyell: I beg to move amendment No. 81, in page 26, line 6, at end insert—
'(2A) No such payment as is mentioned in subsection (2) shall be made in respect of any financial year unless prior to the commencement of that financial year—

(a) the Scottish Executive has submitted to the Secretary of State a report containing the Executive's detailed expenditure plans for the financial year in question, and—
(b) the Secretary of State has laid the report before the House of Commons at least ten sitting days before any motion is made in that House for the approval of a grant of Supply authorising the payment.'

The Chairman of Ways and Means (Sir Alan Haselhurst): With this, it will be convenient to discuss the following: Amendment No. 83, in page 26, line 6, at end insert—
'(2A) The Secretary of State shall not make a payment under subsection (2) if at any time when such a payment would otherwise fall due he is not satisfied that the Scottish Executive has established, or is maintaining, proper arrangements for financial scrutiny and auditing of accounts in accordance with sections (Financial control, account and audit), (Accounting officers) and (Arrangements for independent audit of accounts of Scottish Executive).'.
Amendment No. 242, in page 26, line 6, at end insert—
'(2A) No payment shall be made under subsection (2) unless the Secretary of State is satisfied that appropriate rules have been made under section 66(1) for each of the purposes described in that provision.
(2B) No payment shall be made under subsection (2) unless—

(a) the Scottish Executive has submitted to the Secretary of State a report containing particulars of the expenditure proposals to which the payment relates, and
(b) the Secretary of State had laid the report before the House of Commons at least ten sitting days before any motion is made in that House for the approval of a grant of supply out of which the payment is to be made.'.
Amendment No. 296, in clause 62, page 26, leave out lines 33 and 34.
Amendment No. 297, in page 26, line 36, at end add—
(4) The total sums which the Scottish Parliament proposes to pay out of the Fund in any financial year shall not exceed the sums expected to be paid into that fund for the same financial year.'.
Amendment No. 257, in clause 66, page 28, leave out lines 13 and 14 and insert—
'(3) Standing orders made under Paragraph 4 of Schedule 3 shall provide that a committee shall be appointed with the function of considering accounts and reports laid before the Parliament in pursuance of subsection (1)(e) and that—

(a) that committee may not delegate its functions to another committee or sub-committee,
(b)no member of the Scottish Executive may be a member of that committee, and
(c)the person chairing that committee may not be—

(1) a person representing a party of which any of the Scottish Ministers are members, or
(2)if each of the parties in the Parliament have one or more of the Scottish Ministers as a member, a person representing the party of which the First Minister is a member.'.
Amendment No. 244, in page 28, line 17, at end add—
'(5) Rules made for the purposes of subsection (1) shall provide for—

(a) accounts prepared under paragraphs (a) and (b) of that subsection to comply with any directions from time to time given by the Treasury as to the form of the accounts, the information to be provided in them and the general practices and principles to be observed in their preparation, and
(b) the designation of accounting officers accountable to the Parliament for the expenditure to which the accounts relate and the specification of their responsibilities.
(6) The Act of the Scottish Parliament by or under which the rules referred to in subsection (1) are made shall make provision that, if the Treasury so direct, those rules and the functions under subsection (2) shall, to such extent and with such modifications as the direction concerned may provide, apply to any body established by an enactment or subordinate legislation and specified in the direction in relation to which it is within the legislative competence of the Parliament to make such provision.
(7) The Act of the Scottish Parliament by or under which the rules referred to in subsection (1) are made shall make provision for the independent person referred to in subsection (1)(c)—

(a) to be appointed by Her Majesty on an address presented by the Parliament, and
(b) to be removed by Her Majesty before the end of the period for which he was appointed only on an address presented by the Parliament approved by a resolution passed by at least two thirds of the whole number of its members.
(8) The Act of the Scottish Parliament by or under which the rules referred to in subsection (1) are made shall make provision for the independent person referred to in subsection (1)(c) to prepare for each financial year estimates of the income and expenditure of his office and for those estimates to be considered by the Parliament or one of its committees or subcommittees.'.
Clause 66 stand part.

New clause 3—Financial control, accounts and audit—

'(1) The Scottish Executive shall, for each financial year, prepare accounts in accordance with directions given to it by the Treasury.
(2) The directions which the Treasury may give under subsection (1) include directions to prepare accounts relating to the financial affairs and transactions of persons other than the Scottish Executive.
(3) The directions which the Treasury may give under subsection (1) include, in particular, directions as to—


(a) the financial affairs and transactions to which the accounts are to relate,
(b) the information to be contained in the accounts and the manner in which it is to be presented,
(c) the methods and principles in accordance with which the accounts are to be prepared, and
(d) the additional information (if any) that is to accompany the accounts.
(4) Any accounts which the Executive is directed under this section to prepare for any financial year shall be submitted by the Executive to the Comptroller and Auditor General no later than five months after the end of that financial year.
(5) The Comptroller and Auditor General shall—

(a) examine and certify any accounts submitted to him under this section, and
(b) no later than four months after the accounts are submitted to him, lay before both the Parliament and the House of Commons a copy of them as certified by him together with his report on them.
(6) In examining any accounts submitted to him under this section, the Comptroller and Auditor General shall, in particular, satisfy himself—

(a) that no expenditure to which the accounts relate has been incurred unlawfully or otherwise than in accordance with the authority which governs it, and
(b) that money received by the Executive for a particular purpose or particular purposes has not been expended otherwise than on that purpose or those purposes.
(7) Where—

(a) by virtue of any enactment other than this section the Executive is under an obligation to prepare accounts dealing with any matters, and
(b) it appears to the Treasury that those matters fall to be dealt with in accounts directed to be prepared under this section, the Treasury may relieve the Executive of that obligation for or in respect of such periods as they may direct.
(8) A reference in this section to the Comptroller and Auditor General may be construed as a reference to such person as he may appoint to exercise on his behalf the specific functions in relation to the accounts of the Scottish Executive which are set out in this section.'.

New clause 4—Arrangements for independent audit of accounts of Scottish Executive—
'.—(1) The Standing Orders of the Parliament shall provide for the establishment of arrangements, supervised by an independent person, for—

(a) the scrutiny of the accounts of the Scottish Executive,
(b) the carrying out of examinations into the economy, efficiency and effectiveness with which the Scottish Ministers and the Lord Advocate have used their resources in discharging their functions, and
(c) the carrying out of examinations into the economy, efficiency and effectiveness with which other persons determined under rules approved by the Parliament to whom sums are paid out of the Fund or by the Scottish Ministers have used those sums in discharging their functions.
(2) Standing orders shall also provide for the consideration by the Parliament, including by any Committee appointed for that purpose, of accounts laid before it in pursuance of section (Financial control, accounts and audit)
(3) For the purposes of this section, a person is independent if he is not subject to the direction control of any member of the Scottish Executive or of the Parliament in exercising that function.'.

New clause 5— Accounting officers—
`.—(1) The Treasury shall designate a member of the staff of the Scottish Executive as the Executive's principal accounting officer.



(2) The Executive's principal accounting officer shall have in relation to the Executive's accounts and finances the responsibilities which are from time to time specified by the Treasury.
(3) The Treasury may designate other members of the Executive's staff as additional accounting officers.
(4) An additional accounting officer shall have in relation to the Executive's accounts and finances such responsibilities as may be specified in the instrument by which he is designated.
(5) The responsibilities that may be specified under this section in relation to the Executive's accounts and finances (or any of them) include in particular—

(a) responsibilities in relation to the signing of accounts,
(b) responsibilities for the propriety and regularity of the Executive's finances, and
(c)responsibilities for the economy, efficiency and effectiveness with which the Executive uses its resources.
(6) The responsibilities which may be specified under this section include responsibilities owed to—

(a) the Parliament or any committee appointed by it to scrutinise the accounts of the Executive, or
(b) the House of Commons or its Committee of Public Accounts, and in the case of an additional accounting officer include responsibilities owed to the Executive's principal accounting officer.'.

Amendment No. 80, in schedule 7, page 85, leave out lines 16 to 21.

Amendment No. 246, in page 85, leave out lines 17 to 21 and insert—
'10. In section 6 of the National Audit Act 1983 (value for money studies)—

(a) after paragraph (c) of subsection (3) there is inserted—"(Ca) the Scottish Executive and any other persons to whom sums are paid out of the Scottish Consolidated Fund; and", and
(b) after subsection (4) there is inserted—
(4A) No examinations should be carried out under this section by the Comptroller and Auditor General pursuant to subsection (3)(ca) unless he has consulted the independent person referred to in section 66(1)(c) of the Scotland Act 1998 and he has taken into account any relevant work done or being done by that person".'.

Mr. Dalyell: Amendment Nos. 81 and 83, which I have also tabled, could be called the reduction of girning amendments, although I do not know whether that is a parliamentary term.
The reality is that in 1999, when my right hon. Friend the Secretary of State for Scotland goes off to Holyrood, accompanied by the hon. Member for Banff and Buchan (Mr. Salmond), they and the Ministers at Holyrood, indeed every Member of the Holyrood Parliament, will soon come to regard the main function of those of us, their former colleagues, who are left at Westminster, to be to pursue one purpose above all others. In their eyes, that purpose will inevitably be to get more lolly, more money, from the Treasury. In the eyes of all Holyrood Members of Parliament, any other function that those of us who are left here may have will be minuscule compared with that one basic task. That is the reality of the matter.

Mr. Salmond: I am sure that the hon. Gentleman will concede that I would have another task in mind that went beyond getting more lolly, as he put it, out of the Treasury. From his remarks, I assume that he does not

intend to stand for the Holyrood Parliament. The Linlithgowshire Journal and Gazette asked me about his intentions just last week and I was unable to answer that question. Can he confirm that he will not be a candidate for the Scottish Parliament?

Mr. Dalyell: The Linlithgowshire Journal and Gazette has been told 15 times that there is no question of that. In the first place, no one is going to select me, so there is a certain finality about that.
The serious point about the amendments is that they represent an attempt—frankly, Sir Alan, I admit to you that it is a futile attempt—to limit the consequences of girning. In case there is any difficulty about that word, it means to complain, complain and complain. That will be our function. A difficult and potentially dangerous and divisive situation could be created when one has a block of people whose function above all others is to complain and ask for more and more and more—a begging bowl in excelsis.
I note that the hon. Member for Banff and Buchan, who is the leader of the Scottish National party, is smiling. He is in the position of the cat that swallowed the cream; I am in the position of the skunk that failed at the garden party.
The probing amendments have been tabled to ask what will be done about the unsatisfactory situation that could create a division, according to which those Scottish Members of Parliament who are left at Westminster will be expected to get money and play a reduced part at this Parliament. That will be a difficult situation. If they do not get that money, they will be blamed for everything that goes wrong. It is in the nature of politicians that we do not like to blame ourselves—rather we find someone else, a scapegoat. In this case, the scapegoat will certainly be the ineffective Westminster Members who fail to produce the money with which Holyrood Members of Parliament can build roads, repair schools, build houses and fund local authorities. In that, there is a difficult, divisive situation.
I promised that I would be succinct, and so I shall be. I shall leave it at that.

Dr. Liam Fox: I shall speak to amendments Nos. 296 and 297. Amendment No. 296 is purely a probing amendment. By seeking to delete subsection (2)(b), we want to find out what expenditure would be covered by this provision that is not included in subsection (2)(a). Can the Minister give us specific examples?
The main purpose of the amendments is to deal with what the hon. Member for Linlithgow (Mr. Dalyell) described as the wedge clause. We have said time and again that expenditure would be the wedge that the nationalists would try to drive into the Scottish Parliament to divide Edinburgh from London. As soon as we started to debate the clause, the hon. Member for Banff and Buchan (Mr. Salmond) told us that that is exactly what they intended to do, and that they had a further objective—to divide the Scottish Parliament entirely from the United Kingdom. I know that hon. Members on the Government Benches do not want that, so I hope that the Minister will pay serious attention to the concept behind the amendment.

Mr. Salmond: Surely the hon. Gentleman is not telling the Committee that that is a blinding revelation to him about the Scottish National party's aims and objectives. It is the first item on every SNP membership card. I cannot believe that the hon. Gentleman became aware of it only this evening.

Dr. Fox: No, I have always been perfectly aware of that, but during the referendum, when voters in Scotland saw the hon. Gentleman on the platform with the Secretary of State supporting his White Paper, which stood for devolution within the Union, a few of them might have thought that he was being, at best, a little disingenuous in campaigning for that, when he obviously had something utterly different in mind. Although he had made that explicit beforehand, I wonder how many voters were caught on the hop.
The concept of a balanced budget is important. It is a discipline that should be brought into a Scottish Parliament from the outset. We all understand the concept from our own lives, even if we do not always manage to achieve a balanced budget, as we realise when the credit card bills come in. The Government make great play of the attempt to get back to budget balance, and all western Governments are trying to achieve it, to make sure that debt is not piled up and passed on to subsequent generations. The Government are making great progress with that, thanks to the healthy revenues from taxation that they are receiving as a result of the successful economic policies that they inherited from the Conservatives.
As we have argued on many occasions, we want to minimise the potential points of friction when the Parliament is set up. The Secretary of State has said repeatedly in Committee that we must consider the worst case scenario. We must prepare ourselves in advance for the tactics that will be employed by those who will seek to break up the Union by using the expenditure wedge.
In the 1980s, we saw Militant Tendency members from the pre-Thatcher unreformed Labour party setting illegal budgets in Liverpool, Bristol and other places, which they knew that they could never finance, and expecting central Government to bail them out, as a way of creating friction between local and central Government. They left huge debts behind. There are councils in the United Kingdom that have bigger debts than some small third-world countries.
Can the Committee imagine how much more dangerous such friction would be with a nationalist complexion? London would be blamed for the financial shortcomings of an Edinburgh Parliament. Some of those who stand for the Parliament will make promises that they know cannot be fulfilled within the expenditure limits that the Government have set themselves, and which they will surely therefore set a Scottish Parliament. When those objectives cannot be realised and disillusionment sets in, the politicians in the Edinburgh Parliament will not get the blame. As the hon. Member for Linlithgow said, politicians seldom blame themselves—in the six years that I have been in the House, I do not remember once hearing a politician blaming himself for anything.
People in Scotland will not blame the actions of the Edinburgh Parliament. They will blame this House. It will be London's fault. The tight purse-strings being held by

this place will be blamed for the problems that fall on the Scottish Parliament. That is the wedge that will be used to destroy the United Kingdom. We cannot rule out that situation entirely, but we can build into the Bill the concept of budget balance, as amendment No. 297 sets out.
Budget balance is a good discipline, which the Government try to apply to themselves. It will be easier to achieve, because some of the functions that tend to run away with public expenditure will not be the responsibility of the Scottish Parliament. It will mean that debt is not passed on to future Parliaments and future generations.
I urge the Minister to take seriously the threat that is posed. He heard the leader of the Scottish nationalists say that they have a further objective. I urge the Minister not to give them that opportunity.

Mr. Welsh: The hon. Gentleman is advancing a strange argument. He is arguing for local government prudence and balancing budgets. May I point out that Scottish National party-controlled councils have the best record of financial prudence anywhere in Scotland? I recommend him to examine SNP-controlled Angus. The hon. Gentleman speaks of balanced budgets, but his own Conservative party doubled the UK state debt when it was in power.

Dr. Fox: Of all the Members in the House, the hon. Gentleman has the most attractive way of presenting a red herring. The councils are not trying to break away from the rest of local government in Scotland, but the nationalists do intend to break the Scottish Parliament away from the rest of the United Kingdom. That is the essential difference. They will use every means at their disposal, and I urge the Minister not to give them the one weapon that they seek above all else: to raise expectations that cannot be funded. The Secretary of State has said several times that we must prepare for the worst case scenario. I urge him to accept the amendment to prevent that occurrence.

Mr. David Davis: One of the great treasures of the House is the Members who pursue a course of courageous individualism. I have crossed swords with the hon. Member for Linlithgow (Mr. Dalyell) on open government, science, foreign policy and public services, but as he follows that course of courageous individualism, it is a great pleasure to support him today and to support his arguments, which apply equally to the amendments tabled by me. I disagree with nothing that he said.
The amendments in my name cover two important areas: the responsibilities of the United Kingdom Parliament, and the application of the proper principles of scrutiny in the Scottish Parliament. The amendments are largely self-explanatory, particularly as they are so long, so I shall concentrate on outlining the general principles involved in them.
I begin with the responsibilities of the UK Parliament. May I say at the outset that I want the Scottish Parliament to work. That is now necessary to the continued integrity of the United Kingdom. In the words of the Secretary of State, who is no longer with us, I want as far as possible a friction-free relationship between the House of


Commons and the Scottish Parliament. A friction-free relationship, however, will not be advanced by withholding information from the United Kingdom Parliament. It will not be advanced by expecting Westminster to rubber-stamp the allocation of a large sum of money, with neither knowledge of its use nor confidence in its handling.
As I outlined in my Second Reading speech, this House is accountable to UK taxpayers for the money raised by taxes in the United Kingdom. That argument would not apply if the Government took the route of financial autonomy raised by the hon. Member for North Tayside (Mr. Swinney)—I told him that I would compliment him, and I hope that I have not done him too much damage—the hon. Member for Falkirk, West (Mr. Canavan), who is not with us, and my right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth). Each of them argued that if there was a Scottish tax base that the Scottish Parliament used, some of the problems that we are debating would not arise. I shall not alarm my colleagues on the Front Bench any more by going further down that line.

Dr. Fox: Hear, hear.

Mr. Davis: I might continue if my hon. Friend provokes me.
Because of the way in which the Government have chosen to finance the Scottish Executive, by a block grant from United Kingdom taxes, we are accountable for it. We should be clear about one thing. It is possible to delegate power, and we are doing that. It is also possible, with proper oversight, to delegate responsibility to a point. However, it is not possible to delegate final accountability. After all, accountability is a duty, not a right. Final accountability for the disposal of taxes lies inevitably with those who raise the taxes. Attempting to avoid that is not delegation, but abdication.
Clause 61 creates the Scottish Consolidated Fund and provides for the Secretary of State to pay the grant from the House into it. My proposed amendment requires the Secretary of State to be satisfied about the Scottish Parliament's accounting and auditing arrangements before he pays the grant. The Bill currently fails to make the Secretary of State accountable, in any meaningful sense, for the annual grant of more than £14 billion that he will pass to the Scottish Parliament.
Amendment No. 242 inserts subsection (2A), which restates a level of accountability that is consistent with devolution. It simply requires that the Secretary of State should satisfy himself that the Parliament has established adequate accounting and auditing rules as required by clause 66 of the Scotland Bill. If he is not satisfied, he must not pay the grant. That straightforward measure will ensure that the Scottish Parliament complies with the Bill's requirements on financial control, and it will hold the Secretary of State accountable to the House for that.

It provides a minimum level of accountability for the £14 billion of United Kingdom taxpayers' money that is voted annually to the Scottish Parliament.

Mr. Dalyell: As a former member of the Public Accounts Committee—albeit a long time ago—I must ask whether that is also the opinion of the Comptroller and Auditor General.

Mr. Davis: Indeed it is. I made my speech on Second Reading after the Comptroller and Auditor General raised with me his concerns about several issues, which I then pursued. Although the arguments that I put on Second Reading and those that I deploy today are my responsibility, the Committee may assume that the Comptroller and Auditor General agrees with all the amendments standing in my name.
The proposed amendment moves some way towards, but is more indirect than, arrangements at Westminster and plans for the Welsh assembly. The second proposed amendment to clause 61 deals with the lack of information provided under the Bill to enable the House to reach a proper decision about the approval of the grant. Under the Bill as it is currently drafted, the House can be asked to vote blind on the annual grant to the Scottish Parliament, contrary to the practice for other expenditure. The House voted funds to the Scottish Office for 1997–98 on the basis of detailed Supply estimates comprising 10 votes and 73 line items. The Bill could reduce that detail to a single undifferentiated figure.
Amendment No. 242 would insert subsection (2B), which would remedy that by requiring the Scottish Executive to supply details of their expenditure proposals to the Secretary of State, who in turn would have to lay that information before the House. The Secretary of State could not pay the grant until that had happened.
I should point out clearly that the Bill does not allow the United Kingdom Parliament to control or direct the expenditure: it simply allows the House to know about it. The amendment is a minimum provision that would give the House some idea of how the Scottish Parliament proposes to use £14 billion of United Kingdom taxpayers' money, which it expects the House to vote to it. It mirrors, to a limited extent, existing arrangements in Westminster and the proposals for the Welsh assembly.
I reiterate: it will not help the relationship between Westminster and Edinburgh if the House cannot have confidence that the money it has allocated—for which it is responsible to the United Kingdom taxpayer—is being well spent. Without adequate powers of oversight, the United Kingdom Parliament will be spending its money blindfolded. That will create friction, not avoid it.
I refer now to the application of proper principles of scrutiny within the Scottish Parliament. Clause 66 specifies the limited framework of accountability and scrutiny that the Scottish Parliament must adopt.

Mr. Welsh: Is the right hon. Gentleman saying that Westminster will scrutinise Scottish taxpayers' money that is allocated by Scottish Members in a democratically elected Scottish Parliament? By demanding that accounts be sent to Westminster—I wonder how long that would take—and approved before the money could be spent, he would impose on a Scottish Parliament the same system


that the Fees Office imposes on Members of Parliament in this place. That is a ridiculous way to treat any self-respecting Parliament.

Mr. Davis: I am sorry that the hon. Gentleman has a problem with the Fees Office, but he has not listened to what I have said. I made it clear at the outset that if taxes were raised directly in Scotland—including hypothecated taxes—these issues would not apply. However, that is not the case: this is United Kingdom taxpayers' money. The hon. Member for North Tayside spoke earlier about the expenditure balance between England and Scotland. Most hon. Members understand only too well that the balance tips towards Scotland.
However, that is not the problem. The problem is that the House is being asked to allocate blind £14 billion—it may be rather more than that—in one block grant. That cannot be good for democracy or for the relationship between this place and the Edinburgh Parliament. I will give the hon. Gentleman one more chance.

Mr. Welsh: The previous Government admitted that the subsidy from Scotland to the United Kingdom was about £31 billion over 18 years. The right hon. Gentleman espouses the creation of a pocket-money Parliament. If all of Scotland's resources were available, it would make a big difference. The right hon. Gentleman wishes to impose a pocket-money Parliament and then demands that the House should retain control over that pocket money. That really is unacceptable.

Mr. Davis: The hon. Gentleman is pulling numbers out of the air from 20 years ago, when the oil revenues were much larger than they are now. As I have said before, the best estimate is between £2 billion and £6 billion—and I think that it is at the lower end of the scale. That does not matter. The hon. Gentleman is missing the point: we are talking about United Kingdom taxpayers' money. It would be a very different exercise if we were dealing with money raised from a Scottish tax base that went straight to the Scottish Parliament—as happens in federal authorities elsewhere, such as in the United States. That may be what the hon. Gentleman wants, but it is not what the Government have provided and it is not what we are dealing with tonight. The Committee must deal with the Bill as it is written.

Mr. Swayne: Does my right hon. Friend agree that it would have been useful to explore the issues of hypothecated taxes and Scottish taxpayers' money, but unfortunately that has been ruled out by the pre-legislative referendum, which the Scottish National party supported?

Mr. Davis: My hon. Friend is absolutely right. The last time he said that, SNP Members went pale—which rather makes his point.

Mr. Dalyell: I understand perfectly well—I have tumbled to it—why the hon. Member for Angus (Mr. Welsh) is so irritated. I would be equally irritated if I were in his position. Does not that bring us to the central conundrum of the entire Bill: the fact that the hon. Gentleman can use the phrase "a pocket-money Parliament" reveals volumes about the difficulty of having a subordinate Parliament in part, although only part, of a unitary state?

Mr. Davis: The hon. Gentleman is absolutely right, and this unique institution is flawed for precisely that

reason. I am attempting to make a difficult entity work because, at the end of the day, I am committed to the United Kingdom, to open government, freedom of information and democracy—all of which are tied up in this equation.
Clause 66 specifies the limited framework of accountability and scrutiny that the Scottish Parliament must adopt. The Government's intention is that the Scottish Parliament will be largely free to devise its own audit and scrutiny arrangements. Clause 66 does little more than suggest the types of arrangement that the Parliament will be expected to devise. Amendment Nos. 257 and 244, again in my name, insert certain fundamental requirements that are currently missing.
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First, amendment No. 257 requires that the arrangements which the Scottish Parliament devises for the scrutiny of reports laid before it by the independent auditor should include the establishment of a committee that is not dominated by the Executive.
Secondly, amendment No. 244 requires that the accounting arrangements of the Scottish Administration should accord with best practice in accounting for and the control of UK Government expenditure.
Thirdly, the rules applying to preparation, audit and scrutiny, for the Scottish Parliament's Administration, should apply also to bodies funded by grants from the Scottish Executive.
Fourthly, the decisions on the appointment and dismissal of the auditor of the Scottish Parliament should be independent of the Scottish Executive. That is one of the most critical provisions in amendment No. 244.
Finally, the funding of the auditor of the Scottish Parliament should not be controlled by the Scottish Executive.
Those are not theoretical issues, nor are they problems confined to the governance of ramshackle regimes or dubious Governments. For example, to take the last issue of the control of the funding of auditors, in the 1980s the Danish Government cut the funding of their parliamentary auditor, leading to a constitutional uproar in Denmark, which eventually led its Parliament to put into effect a parliamentary audit Act almost identical to our own. That is the sort of problem that can arise as a result of the woolly definition of independence in the Bill.
The conditions that I have just outlined are the minimum for not just Westminster but the Scottish people to have absolute confidence in the financial probity of the Scottish Executive and Parliament. It is, for example, inconceivable that proper scrutiny arrangements would allow a scrutiny committee that was dominated by the Executive, or that the Scottish Executive should be allowed to control the Scottish Parliament's auditor by controlling his appointment, dismissal and funding.
The Government say that those are matters for the Scottish Parliament to decide. For the moment, let us put aside the fact that this is UK money that we are talking about. The Government should be clear. Either they are saying that the Scottish Parliament will put in place those minimum requirements, in which case the apparent freedom that it is exercising is illusory and we should properly deal with them here, or they are saying that they are willing to take the risk that it will not put in place such arrangements, with all the dangers that that involves.
We should remember that we are not simply legislating for the next few years, for the duration of some concordat, or for some other short period. The Scottish Parliament's institutional arrangements are supposed to be permanent. The Government may well in good faith expect the Scottish Parliament to implement similar scrutiny arrangements to those that operate in the House, but no one can predict how a future Scottish Executive, if so determined, might change the rules to hinder scrutiny of their actions.
One must also understand—this goes to the pocket-money Parliament argument, picked up so acutely by the hon. Member for Linlithgow—the unique pressure that could face a Scottish Public Accounts Committee. The Scottish Parliament will not raise its own taxes; it will be dependent on another institution for its funding—therefore, the action of exposing waste or corruption could place it in the peculiar position of saying, "We wasted this amount of money last year, but can we have some more this year, please?" That would be an invidious position.
Therefore, it is vital that those minimum safeguards are guaranteed, in the interests of the Scottish voter as well as of the United Kingdom taxpayer in general.
Even then, no legislation can ever be drafted to prevent the Scottish Parliament or Executive, if so determined, from hindering or constraining the proper audit and scrutiny of their affairs. The House still needs the protection of its own auditor, the Comptroller and Auditor General, having sufficient—I use that word carefully—access to be able to report independently to Westminster, should the need arise.

Mr. Dalyell: Does the right hon. Gentleman agree that in 1977, 1978 and 1979, if it had been possible to find legislation to cover this, those clever men, Bruce Millan and John Smith, would have found it, and those equally clever men, Sir John Garlick, Sir Michael Quinlan and their advisers, would certainly have found it? It eluded them all.

Mr. Davis: The hon. Gentleman again points up the problem of the structure. He is right in his allusion. I am trying to do what I can as a Member of the House and as Chairman of the Public Accounts Committee to influence the Government to go down a route that will make the legislation work as well as it can and ensure, in the Secretary of State's words, the most friction-free arrangement possible, in the interests of the United Kingdom and the people of Scotland.
Under the Bill, the Comptroller and Auditor General is denied access to the accounts, and he cannot work with the local auditor. Amendment No. 246 seeks to put that right. The aim is not to duplicate audit, nor to curb the actions of the Scottish Parliament's own auditor, his power, independence or range. The amendment is carefully crafted so that the objective can be achieved with a light touch, in co-operation with the Scottish auditor, and in such a way as to give great confidence to Members of this House of Commons and the Scottish Parliament in the disposal of the taxes that they have raised and for which they are accountable.

Mr. Michael Moore: First, I declare an interest. As we are concentrating on the scrutiny and monitoring of financial arrangements within the new Scottish Parliament, I have to admit, more than anything else, that I am a Scottish chartered accountant. I am a member of the Institute of the Chartered Accountants in Scotland, the oldest accountancy body in the world, which establishes beyond reasonable doubt that the Scots are well able to account for their money and have an honourable and long tradition of so doing.
The Liberal Democrats broadly agree with the drift of the amendments as far as they go in establishing the principle that we should have adequate scrutiny. But we want to distinguish between proper scrutiny and imposing a financial straitjacket. In amendment No. 81 in the name of the hon. Member for Linlithgow (Mr. Dalyell) and amendment No. 242 in the name of the right hon. Member for Haltemprice and Howden (Mr. Davis) we see a straitjacket being imposed upon the new Scottish Parliament, essentially requiring some sort of pre-budgetary detailed explanation of where funds must go. People are entitled to say that that surely busts the principle of devolution. The Members of the Scottish Parliament should decide exactly that. Decisions on the financial amounts being passed to the Scottish Parliament should be for it, not this House of Commons.

Mr. Dalyell: I recollect a pleasant occasion at the Tait hall in Kelso during the referendum when that question was raised in a slightly different form. It is a genuine problem. How are people whose constituents are involved expected to vote extra moneys, perhaps—as under something like Barnett, although they may be reduced—to people over whom they have no financial scrutiny rights whatever, to the disadvantage of their constituents? That is testing human nature a bit far.

Mr. Moore: I remember the debate with the hon. Gentleman with some fondness. It was a busy hall in Kelso that night. Many Conservatives who probably were not out during the election campaign were certainly in evidence in the town hall on that occasion.
The House of Commons has, for a long time, predating my membership, debated the principles on which the new Parliament is to be established. Members of this House can have no difficulty in knowing that Scottish Members of Parliament will look after the money passed to them with some care and accuracy. We do not dispute the idea that information should be flowing back to this House; it is the manner and style in which it is done that we question. The idea that we should have a straitjacket and that the dead hand of the Treasury should still control what is going on in Scotland to the last tuppence ha'penny is not acceptable.

Dr. Fox: The whole point is that this is a devolved Parliament. The funding for it comes from all UK taxpayers through this House, and accountability for that expenditure must ultimately lie here.

Mr. Moore: The hon. Gentleman seeks to deny us an important part of the principle of devolution. Most Scottish people contribute to the taxes that come to this place.

Dr. Fox: That is exactly right. Scottish people will contribute to that funding. Scottish Members of


Parliament will still sit in this House because they will be responsible to their constituents, who are also taxpayers. Scotland will have a devolved Parliament, not a federal system.

Mr. Moore: This House is in the process of making a decision that will devolve powers to the Scottish Parliament. It goes to the heart of what we discussed in the devolution debates in the run-up to the referendum: we must have confidence in the people of Scotland adequately to scrutinise their affairs, particularly their financial affairs.

Mr. Grieve: Will the hon. Gentleman give way?

Mr. Moore: I have given way on a number of points.

Mr. Swayne: Give way some more.

Mr. Moore: I thank the hon. Member for New Forest, West (Mr. Swayne) for his kind advice, but I shall press on.
The issue at stake is that the Scottish Parliament should set up its own financial scrutiny of the sums devolved to it from the Westminster Parliament, but that there should not be a straitjacket that requires the Treasury to have a pre-Budget view of exactly what will happen in the Scottish Parliament.

Mr. David Davis: Will the hon. Gentleman read the Bill again and look at clause 90, which gives precisely those powers to the Treasury, but not to this House?

Mr. Moore: The right hon. Gentleman makes an extremely good point. I was going to come to that point but I am happy to deal with it now. Clause 90 causes us a great deal of difficulty because it allows the Treasury to get almost any amount of information directly from the Scottish Parliament rather than through this House. We would be much happier about the arrangement if the House rather than the Treasury received the information.

Mr. Salmond: We have already covered this matter in a previous clause. Perhaps the right hon. Member for Haltemprice and Howden (Mr. Davis) was not here then, but we identified the fact that Committees of this House will be able to summon witnesses and documents from the Scottish Parliament. If hon. Members cannot catch up with the debates that we have had, it will prolong the debates that we are now having.

Mr. Moore: The hon. Gentleman is most kind—

Mr. Jenkin: The hon. Gentleman should have said "my hon. Friend". The hon. Member for Banff and Buchan (Mr. Salmond) is a nationalist friend.

Mr. Moore: The gist of the hon. Gentleman's sedentary comments is completely inaccurate.
We support the amendments in the name of the right hon. Member for Haltemprice and Howden. Amendment No. 257 seeks to establish the principle of a suitably independent parliamentary Committee within the Scottish Parliament. It is an important principle of this House that an independent parliamentary Committee should be

established and we are glad to support that in this context. We support amendment No. 244, which seeks to strengthen the position of the independent person who is responsible for preparing the accounts and carrying out the audit function, but we must be careful about how far we take the Treasury's influence. As I said, we are particularly concerned about clause 90.

Mr. Dalyell: Is not Pandora's box well and truly wide open? The hon. Gentleman referred earlier to the dead hand of the Treasury; he now makes another comment about the Treasury. The implication is that the English will be subject to Treasury rules and that, somehow or other, the Treasury rules will not apply north of the Scottish border. Such a position is untenable in a United Kingdom. We are discussing extremely important matters.

Mr. Moore: I accept that we are discussing important matters but not that we should necessarily accept all the proceedings that go on now, or the gist of them, which is that the Treasury should have so much power and influence. The hon. Gentleman bypasses the fact that the Treasury can go straight to the Scottish Parliament without reference to the Westminster Parliament.
The essence of what is required for the new Scottish Parliament is that we should devolve responsibility to look after the funds allocated to it, and that those funds should be adequately scrutinised. We should have complete confidence in the Scottish Parliament's ability to do that through the proposed independent Committee. We support those aspects of the amendments.

Mr. Salmond: I find myself trying to come to the rescue of the Unionist forces in this House in terms of their logic and reasoning. Various arguments have been put forward. The right hon. Member for Haltemprice and Howden (Mr. Davis), and the hon. Members for Woodspring (Dr. Fox) and for Linlithgow (Mr. Dalyell) say that the Government's arrangements skate on thin ice and are extremely dangerous. They say that they will provoke a mentality of "Gie us mair" from a Scottish Parliament, and that that will be the wedge that will break up the United Kingdom. Apparently, that is due to my colleagues and I sitting like cats enjoying the cream. However, it hardly squares with the vote that took place a few minutes ago, when we put forward an alternative arrangement.
The right hon. Member for Haltemprice and Howden was kind enough to say that our proposal would have avoided those problems by setting up a line of accountability, but in the Division a few minutes ago he sat and abstained. He did not even vote one way or the other. He has a brave heart when he praises the SNP amendments, but a faint heart when he refuses to go into the Lobbies. We can hardly be accused of the faults which the Unionists see in the Government's arrangements when we put forward a separate line of accountability, which would have avoided those arrangements.
I think that there are grave deficiencies in the Government's proposals, but how do the Unionist forces propose to deal with them? The hon. Member for Linlithgow says that the Scottish Parliament should submit accounts before it gets any money, as though the


submission of accounts would somehow remove the grievances. I should have thought that putting the Scottish Parliament in a subservient role and giving it a begging-bowl mentality would accentuate the grievances.
The underlying question put by the right hon. Member for Haltemprice and Howden seems to doubt the Scottish Parliament's ability properly to scrutinise its expenditure. I have just seen a parliamentary answer, which estimates the cost of the new accommodation for Members of Parliament in this place at £250 million.

Mr. Swayne: Shameful.

Mr. Salmond: The hon. Gentleman is blameless because he was not in this place when the previous Government authorised such expenditure. None the less, it comes amiss from Tory Front-Bench Members to complain about the cost of setting up a national legislature for Scotland when they were prepared to spend 2.5 times as much, and perhaps more, in providing extra rooms for Members of Parliament at Westminster.

Mr. Swayne: I just wanted to draw—

The Chairman: Order. Before the hon. Gentleman intervenes, may I express the hope that he will not pursue the matter of the new parliamentary building?

Mr. Swayne: I shall not rise, then.

Mr. Salmond: The hon. Gentleman has been cut off in his prime. As he develops experience in this House, as he did at St. Andrews university students representative council, he will find a way to change his interventions after helpful guidance from the Chair.
The proposal for the funding of the Scottish Parliament which has been criticised is not an SNP proposal. The SNP proposal was distinct and clear. It would have set up the clear line of accountability that hon. Members want.
It is fascinating that we should be attacked for arrangements that are not of our making. The hon. Member for Woodspring claimed that, in the referendum, the question of the SNP being an independence party was not raised—[Laughter.] I see the Minister of State laughing. It was an ever present question in every television debate. The Secretary of State and I resolved it by pointing out that it was a matter of choice for the people of Scotland. The people of Scotland were rather happy with the argument that it would be a matter of democratic choice for them.
I do not know how many interventions the hon. Member for Woodspring made during the referendum campaign. I did not see him as often as I saw the right hon. Member for Devizes (Mr. Ancram). If we had seen him more often, perhaps the Conservatives would have done better in the referendum. That argument was well ventilated during the campaign.
The proposal outlined by my hon. Friend the Member for North Tayside (Mr. Swinney) would have provided better scrutiny. There would be greater financial accountability if the Scottish Parliament raised its revenue. I am sorry that the right hon. Member for Haltemprice and Howden

disputes that point. The questions dealt with by the Treasury last year on the Scottish financial surplus are conclusive, at least for the years to 1994–95.
Scottish Members will know Mr. Jim Stevens, who is an economist and a member of the Scottish Labour executive. I think he has been called the "Hammer of the Nats", as his views on devolution are sometimes closer to those of the hon. Member for Linlithgow than they are to those of Members on the Labour Front Bench. I have disagreed with Mr. Jim Stevens on just about everything to do with politics and economics in Scotland in the past decade. To his credit, he had the generosity to say that we were right. In The Scotsman on 29 March 1997, he referred to the substantial fiscal surplus in Scotland over the years to 1994–95. He said:
I am saying that the SNP are right. The evidence produced from the Scottish Office and the Treasury suggests that they are right.
That may be the first and last time I cite Mr. Jim Stevens in support of my arguments. None the less, as an economist, his pursuit of the truth overrode his political instincts, and he made that concession during the general election campaign.
I regret that hon. Members who now argue for amendments that contain an artificial proposal for more accountability and for more strings to be attached to the Scottish Parliament did not support the previous set of amendments, which would have established such accountability in a real sense. These amendments do not provide a solution. It is unsatisfactory for a Parliament to have the ability to raise only 3 per cent. of its revenue, but the solution is not to impose checks and balances, and to require accounts and expense claims to be submitted to the Treasury or to this Parliament. That is insulting in the extreme. The solution is to move towards a more financially accountable Parliament.
The hon. Member for Woodspring says that the Tory amendments would ensure that the Parliament pursues a balanced budget. The Tories doubled the United Kingdom national debt in the space of seven years, yet the hon. Gentleman feels that he is quite entitled to argue at the Dispatch Box that their amendments will impose greater financial accountability on the Scottish Parliament. Does he not realise that people may be insulted to hear that argument from a party that played fast and loose with Scottish resources and with United Kingdom finances?

Dr. Fox: The hon. Gentleman is allowed to enjoy his fantasy, but he may remember that in the 1980s we paid a substantial proportion of the national debt left to us by the Labour Government. However, we shall not go into that.
Given that funding for the Scottish Parliament will come through this Parliament, which contains Scottish Members, what appropriate means of scrutiny does the hon. Gentleman think this Parliament should have over the money that is transferred out of the United Kingdom to the Scottish Parliament?

Mr. Salmond: It is fact, not fantasy, that the Conservative Government under the previous Prime Minister, the right hon. Member for Huntingdon (Mr. Major), increased the national debt by £200,000 million to its highest level in history. For the


hon. Gentleman to table a balanced budget amendment to try to restrict the Scottish Parliament is blatant hypocrisy.

Mr. Jenkin: Answer the question.

Mr. Salmond: The hon. Gentleman should restrain himself. I shall answer in my own way, in my own time. The previous range of amendments would have provided financial accountability. Tory Front-Bench Members chose to abstain, so they cannot now argue that accountability should overlie this parliamentary arrangement. If I were a devolutionist, I would say that devolution is power retained, so that the ultimate power and responsibility is retained by this place. I am sure that the Minister will say something of that sort. The problem for some hon. Members is that they have suddenly realised that that will create tension between the Scottish Parliament and the Westminster Government. That tension is implicit in the proposals. However, I depart from Conservative Members and from the hon. Member for Linlithgow in that I believe that the move to independence will take place not because of the tensions, but because of the growing confidence of the Scottish people as they see the Parliament in operation. It will legislate on subjects in a way that is far superior to the way in which the House has legislated in the past 20 years or more.

Mr. Grieve: If the hon. Gentleman is right that the Scottish Parliament should scrutinise its own accounts, doubtless it will soon become apparent that we need not worry about that. I should be grateful if he would pick up the question put by my hon. Friend the Member for Woodspring (Dr. Fox). Given the way in which the Bill is constructed, does the hon. Gentleman have any suggestions about how scrutiny may be exercised by this Parliament over the funds that will be transferred to Scotland?

Mr. Salmond: The hon. Gentleman and his hon. Friends sat on their hands when we argued for financial accountability in our amendment. It comes amiss from him, some three quarters of an hour later, to raise that point again.

Mr. Jenkin: It was a bad amendment.

Mr. Salmond: If it was a bad amendment, where were the Conservative amendments to achieve that accountability in a better way? The hon. Gentleman cannot have his cake and eat it. The problem for the Conservatives is that in debate after debate on the Bill they have taken a fundamentally hostile attitude towards the Scottish Parliament. They claim that they have now accepted the democratic decision and will of the Scottish people, but they have taken a grudging, pernickety, restraining attitude towards the Scottish Parliament, which is why they are on 9 per cent. in the Scottish polls.

Mr. Swayne: rose—

Mr. Salmond: Two weeks ago, we discussed the fact that a parliamentary Committee in the House has the ability to summon Scottish Ministers and examine accounts. Conservative Members were quite happy to

accept that the Scottish Parliament will not have a corresponding power to summon Ministers and examine documents from the Westminster Parliament.

Mr. Swayne: rose—

Mr. Salmond: The Government are introducing many checks on the autonomy of the Scottish Parliament, but the Conservatives want to introduce more checks and restraints. They are hostile to the Scottish Parliament having any freedom and autonomy.

Dr. Fox: This is a wonderful debate, because this is the crux of the matter. The Scottish Parliament is not fiscally autonomous. Its funding comes through the United Kingdom Parliament, so accountability rests with this Parliament. The hon. Gentleman wanted an autonomous Scottish Parliament, so he has difficulty with the Government's proposal for a devolved Parliament.

Mr. Salmond: The hon. Gentleman must allow me to argue for my own proposal. I am not here to argue for the Government's proposal.

Mr. Jenkin: The hon. Gentleman argued for it in the referendum campaign.

Mr. Salmond: I do not remember the hon. Gentleman intervening much in the referendum campaign. As I said, if the hon. Member for Woodspring had intervened more, perhaps the Tories would have achieved a better result. If the hon. Member for North Essex (Mr. Jenkin) had intervened in that campaign, I am sure that they would have had an even worse result.

Mr. Swayne: I presume, Sir Alan, that I will be in order if I tell the hon. Gentleman why I sat on my hands at the end of the previous debate. The hon. Gentleman's amendments were illegitimate because of the constraints of the pre-legislative referendum, which his party supported. The White Paper ruled out the financial accountability that he desires.

Mr. Salmond: When the hon. Gentleman has had some experience in the House, he will know that, had my amendments been illegitimate, the Chair would not have selected them for debate and vote. I have known the hon. Gentleman for a long time, and he has not changed many of his habits.
I have been generous, because I have given way to Conservative Members some seven times. I shall expect reciprocation in future debates.
Let me summarise my argument. If hon. Members want financial accountability—if they want the democratic accountability that goes with a Parliament's ability to raise its own revenue and decide how to spend it—they should have followed that logic into the Lobby. There is no way of reproducing such accountability by imposing a straitjacket in the form of amendments that will be seen as insulting—almost authoritarian—in terms of the Westminster Parliament's relationship with the Scottish Parliament. Either we have an accountable Parliament or we do not, and those who are not prepared to vote for an accountable Parliament are in a very poor position to attack the arrangement that has been made.
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The logic of why the Scottish Parliament is not accountable in terms of financial arrangements comes from the fact that it can raise only 3 per cent. of its revenue through its autonomous tax-raising power. That is the point: if the line of accountability is to be changed, the percentage must be changed, either in the way that we suggested a few moments ago or through some other device—some other amendment. The idea that setting up an accounting Committee or supra-Committee, or giving the House a role in overseeing the Parliament, will resolve the difficulties foreseen by Conservative Members and the hon. Member for Linlithgow is fantasy. If anything, such action will exacerbate those difficulties—will exacerbate the grievance. Those who, like me, believe that the route to independence is the Scottish people gaining confidence in an institution that develops in a positive manner do not approve of the grievance politics being peddled by the Conservative party.

Mr. MacGregor: I shall make two comments about the speech of the hon. Member for Banff and Buchan (Mr. Salmond). First, halfway through his speech he referred to the tensions and frictions that would be created by what is being proposed. I think it fair for the hon. Gentleman to argue—as we have argued—that tensions and frictions would be involved in the whole arrangement that we discussed in our last big debate, when we voted on the issue. We pointed out then that tensions and frictions were inherent in what we were discussing. But I do not see how the hon. Gentleman can say that the same tensions and frictions will arise from what is actually a technical and parliamentary matter, rather than a matter of fundamental disagreement about levels of public expenditure and the like. I think that the hon. Gentleman grossly exaggerated the impact of the amendment, and approached it from the wrong standpoint.

Mr. Jenkin: The amendments imply no more powers than the House has implicitly. The inability of the hon. Member for Banff and Buchan (Mr. Salmond) to accept those implicit powers shows that his support for the Government during the referendum campaign was designed simply to mislead the Scottish people about his real intentions.

Mr. MacGregor: I was going to come on to what the amendments amount to, but my hon. Friend has made a fair point.

Mr. Salmond: Surely the right hon. Gentleman will not seriously argue that anyone in Scotland, or in the Committee, is under any misapprehension about my support for independence throughout my political career. How on earth can the right hon. Gentleman, given his experience, agree with that juvenile on the Opposition Front Bench who claims that I have been misleading people?

Mr. MacGregor: That is not what I was saying. The hon. Gentleman is extremely good at standing up and making a point that is entirely irrelevant to what has gone before.
Let me make my second point. The hon. Gentleman argued that, if we were concerned about accountability, we would have voted for his amendment—on which he

divided the Committee—in the last debate. That amendment, however, sprang from a completely different view of what the Scottish Parliament ought to be, and we naturally were not going to follow its line. The amendment that we are discussing now is concerned entirely with the Scottish Parliament as it is being established by the Bill, and is a much better way of achieving the desired objective. It would be foolish of us to vote in favour of an amendment with whose basic principle we do not agree, rather than an amendment that addresses the Bill as it stands.
I was unfortunately unable to be present for the Second Reading debate, but I read the report of it thoroughly, and was struck by what had been said by my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis). I noted that the Minister had listened to my right hon. Friend attentively, and had responded sympathetically, saying that there were real issues that needed to be addressed. That is very much my standpoint, and that is why I was keen to participate tonight and to support my right hon. Friend.
The issue, in fact, is simply about the House's responsibilities in terms of financial probity and value for money—but especially financial probity, which is the whole point of the Public Accounts Committee and the Comptroller and Auditor General and his staff. Let me say this to the hon. Member for Banff and Buchan: we are surely discussing an issue of principle, relating to the way in which expenditure authorised by the House is scrutinised to ensure that the money is spent in the way that the House originally intended. The issue is about that, and nothing beyond that. I think that the principle will be breached in a major way if the Comptroller and Auditor General cannot report to the Public Accounts Committee, and the Public Accounts Committee cannot then scrutinise and take evidence on what he has said—if that is entirely delegated to the Scottish Parliament. As several of my hon. Friends have said, it is the House of Commons that decides on the amount that goes to the Scottish Parliament—

Mr. Salmond: Will the right hon. Gentleman give way?

Mr. MacGregor: Let me just finish the sentence, because I am sure that I am about to hear another irrelevant interruption.
It is the House of Commons that decides on the amount, and it is therefore from United Kingdom taxpayers that the money will come. It is a basic principle that that is one of the purposes of the House, and one of the purposes of the PAC and the Comptroller and Auditor General.

Mr. Salmond: The House of Commons is free to investigate the amount that is sent to the Scottish Parliament. The amendments are about investigating the way in which the money is then spent. Even now, in the Scottish Office, it is for the Secretary of State for Scotland to decide how to shift and allocate money between budgets. The right of the House to investigate the amount that is being sent to Scotland will be unaffected by the legislation.

Mr. MacGregor: The hon. Gentleman's position strikes me as even more curious. He says that in some


ways the House has the ability to scrutinise, but, in the way that matters most to the House, it has no such ability. The general point is that the House can scrutinise the probity of expenditure through the PAC and the Comptroller and Auditor General, but apparently that is the one area from which it excludes itself through the Bill.
The hon. Gentleman made the fair point that parliamentary Select Committees would be able to call Scottish Ministers and civil servants—I presume—to appear before them. That is part of the normal process of Select Committees, but the PAC has a different function, and that is the function that is being excluded under the Bill as it stands.
Let me make two more points. First, there is an important issue that the Minister must meet head on if he is to reject my approach. Clause 90 has already been mentioned, but I must say that it strikes me as an affront to the House to allow Treasury civil servants to demand information that the House cannot demand, and scrutinise it, while the Comptroller and Auditor General apparently cannot do that.
My other point relates to local government expenditure. The Audit Commission normally scrutinises that—just as, presumably, the equivalent of the Comptroller and Auditor General will in the Scottish Parliament. I understand that the Comptroller and Auditor General has the right of access to the Audit Commission and to all Audit Commission papers, and that it would be possible for the Comptroller and Auditor General to recommend to the PAC that an issue needed to be scrutinised in terms of financial probity. That, however, seems to be impossible in relation to a huge chunk of United Kingdom taxpayers' money—£14 billion plus.
Perhaps the Minister will be able to convince me otherwise, but I think that we are setting a dangerous precedent, and creating a loophole in the way in which moneys voted for by the House can be scrutinised not just by Members of Parliament, but with the back-up of staff who do much of the detailed work to unearth whether there is a case to answer. That is why I think that my right hon. Friend—who is already doing a splendid job as Chairman of the PAC—is fulfilling his role in bringing the issue before the Committee and urging it to accept the amendments. I hope that, if we do not receive a satisfactory and convincing answer tonight on a matter that should concern all hon. Members, the matter will be scrutinised further in another place.

Mr. Swayne: When I used the term "illegitimate" to describe the amendments of the hon. Member for Banff and Buchan (Mr. Salmond), I was being charitable. I might have been tempted to use unparliamentary terms. I described them as illegitimate because the hon. Gentleman is attempting to lead us down a path that it would be interesting to follow, to discuss and to debate—perhaps coming up with a different Bill—but the time for that has passed.
The people of Scotland were offered a done deal in the White Paper and it is illegitimate to table a series of amendments that take us away from the White Paper. That is precisely why I took the attitude that I did.

Mr. Salmond: In terms of financing and funding, the White Paper argued for the Barnett formula.

The hon. Gentleman will have noted that some of his colleagues have questioned the Barnett formula. Does he regard their actions as illegitimate?

Mr. Swayne: The hon. Gentleman has misunderstood the attitude of Conservative Members. We have not questioned the Barnett formula. It has been questioned largely by Labour Members, particularly northern Labour Members. This Pandora's box has been opened elsewhere.

Mr. Salmond: Just before Christmas, the Treasury Committee published a report. With the exception of the hon. Member for Gordon (Mr. Bruce), every other member of that Committee—Labour and Tory—questioned the Barnett formula.

Mr. Swayne: That was the attitude of a Select Committee of the whole House rather than of the Conservative party.
I wish to remain in order, to be brief and to concentrate on amendment No. 297, which adds the proviso that the total sums that the Scottish Parliament pays out of the fund in any year shall not exceed the amounts that are paid in. That is an essential requirement to ensure that the Parliament's expenditure programme is consistent with the principles of a balanced budget. It is a guarantee against the budget exceeding the Parliament's income in any year. I suspect that it will prevent any posturing in relation to the setting of illegal budgets that are more political than financial.
Let us consider the pressures under which the parliamentarians may find themselves. Let us suppose that the UK Parliament and the governing party find that they have to take tough decisions, perhaps having voluntarily taken on the spending constraints of a previous Administration. They find that they are able to live within those constraints. However, the Parliament in Scotland, experiencing different social problems, perhaps with unemployment rising in Scotland—although not in the rest of the kingdom—finds that it is unable to live within those constraints. There will be huge pressure on those parliamentarians at least to posture—if they cannot find real money—in setting a budget that is well in excess of that which the fund would allow. The amendments are a preventive measure.

Mr. John Hayes: I had not intended to speak in the Committee until I was galvanised by listening to the hon. Member for Banff and Buchan (Mr. Salmond) on the monitor. He spoke for a long time, so I listened for a long time, but he did give way often, as he has already said. The key issue in this debate is the financial probity of the House and its responsibility to ensure that money is spent properly and appropriately.
The problem with the nationalist argument is that it assumes that the sovereignty that will be transferred from the House to the Scottish Parliament is a transfer of absolute sovereignty and supreme responsibility. That is palpably not true. The assembly has democratic legitimacy and a place within a United Kingdom, but it does not have the supreme authority that sovereignty demands. That is retained by this Parliament. Therefore, the duty to ensure financial probity and proper control of expenditure must ultimately still rest with this Parliament. That is the point that the hon. Gentleman ceased to take on board during his contribution.
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As my right hon. Friend the Member for South Norfolk (Mr. MacGregor) said, the debate about the responsibility for controlling expenditure is not in itself contentious because the House's powers in that respect are implicit in its role and in its status. The nationalists may not be able to buy that. Although I do not doubt the intentions, integrity or beliefs of the hon. Member for Banff and Buchan, as the official Opposition spokesman, my hon. Friend the Member for North Essex (Mr. Jenkin) said, the truth is that the way in which they were presented to the electorate in Scotland during the referendum was fundamentally dishonest. That is not to say that the hon. Member for Banff and Buchan is dishonest or that he does not genuinely believe in independence for Scotland, but the way in which he dressed up and marketed those beliefs to attract the maximum number of votes—for a cocktail of measures with which even he did not agree and which were put together by the Labour party and his own—was a fraud and a deception.

Mr. Dalyell: Does the hon. Gentleman agree that he came rather late to this debate and that, rather than hearing him provoke the hon. Member for Banff and Buchan (Mr. Salmond), some of us who have raised serious issues would like to hear the Minister's response?

Mr. Hayes: With respect to the hon. Gentleman, to whose wisdom, understanding and diligence in these matters I warmly pay tribute, the point that I am making—and it is a serious point—is that the Scottish nationalists are fundamentally at odds not only with Conservative Members, but with Labour Members. The Scottish nationalists' perception of the role and status of the Scottish Parliament is at odds with the White Paper, the Bill and the view that the House has supreme ultimate authority to ensure that money is spent properly and wisely and that the mechanisms must remain in place to guarantee that authority.

Mr. Alasdair Morgan: Nothing that the hon. Gentleman says about the divergence of views between ourselves and the Labour, Conservative or Liberal Democrat parties in Scotland will come as a surprise to anyone living in Scotland. What he says about the potential problems involving the probity of a Scottish Parliament is an insult to everyone living in Scotland. If repeated, that sort of remark will ensure that the number of Conservative Members representing Scotland will remain at its present level: zero.

Mr. Hayes: That is, of course, absolute nonsense because there are many—

Mr. Dalyell: On a point of order, Sir Alan. Has not Madam Speaker ruled that hon. Members who are not present to hear opening speeches should not make speeches? Is it not an abuse to come into the Chamber and make a blathering speech, when important speeches have been made by hon. Members on both sides of the Committee, to which we need an answer?

The Chairman: Madam Speaker's remarks were directed towards statements in the House. However, the hon. Gentleman is right that it is a convention and a

courtesy that hon. Members do not seek to participate in debates in which they have not heard the main arguments. The hon. Member for South Holland and The Deepings (Mr. Hayes) rose and, in the circumstances, the Chair had to call him.

Mr. Hayes: I can assure you, Sir Alan—I did mention this earlier—that I had been observing the—

The Chairman: Order. The hon. Gentleman is a new Member, but I must tell him that it is no excuse to come into the Committee and plead that he has been watching the debate elsewhere. The understanding is that to take part in a debate in this House, an hon. Member must be present in this Chamber.

Mr. Hayes: I obviously bow to that instruction, Sir Alan. I will be brief. Let me make this point—

Mr. Salmond: In conclusion, I hope.

Mr. Hayes: It is a repetition, but clearly the hon. Gentleman does not understand it. His view is a divergence—not because of any fundamental debate about the role of Scotland and the role of England-but because he does not recognise the ultimate authority of this Parliament to guarantee probity in expenditure in respect of this Parliament and the new devolved Parliament. That is a fundamental difference, with which the amendments seek to deal.

Mr. McLeish: I want to reflect seriously on the points raised in the debate, in which many hon. Members have made good contributions to a serious subject. It is imperative that the new Parliament takes seriously effective accounting, auditing and value for money. It will enhance the credibility of the Parliament from day one if it has the appropriate procedures, and if it makes clear—as I will tonight—that every activity of expenditure and monitoring will be taken with the utmost seriousness.
I have had some discussions with the Chairman of the Public Accounts Committee, the right hon. Member for Haltemprice and Howden (Mr. Davis), which I hope to reflect in my comments tonight. I also wish to refer to the concerns of the right hon. Member for South Norfolk (Mr. MacGregor), who has long experience in the House. With longevity in this place comes an understanding of the importance of the Comptroller and Auditor General and the PAC. Like many hon. Members, I was a member of the PAC in my first year in the House. It was an experience which has served me well. I should like to reflect the sentiments of that period and the comments of my hon. Friend the Member for Linlithgow (Mr. Dalyell).
We are covering important ground. From the outset, it is important to realise the nature of the Parliament we are establishing. My hon. Friend the Member for Linlithgow has a long-standing and principled record of opposing devolution, but he has commented on the procedures to be established in this House and the Scottish Parliament. The Conservatives have made points—sometimes not-so-veiled points—in relation to their concerns about the Parliament, but have focused on particular issues.
The Parliament will be a legislative body with law-making powers. Crucially in this context, it will have a clearly defined and separate Executive. That is


important. People may be cynical and have lingering doubts about the Bill, but it is important to make that point. In these circumstances, it is the right—indeed the duty—of the Scottish Parliament to hold the Executive to account.
This House must ensure that the Parliament is in a position to hold the Executive to account, but not prescribe every detail of how it is to do that. It is important that the Parliament takes ownership for its own procedures, rather than have these foisted on it. In that way, they are likely to be more successful.
For those reasons, we said in the White Paper that the detailed arrangements that the Scottish Parliament makes to control and scrutinise the spending of the Scottish Executive will be a matter for the Scottish Parliament and its Committees, but that the Scotland Bill will lay a general obligation on the Parliament to establish effective scrutiny and audit arrangements. The Bill does that. It sets out a framework for the Parliament to legislate for the rules regarding the allocation and approval of expenditure, the accounting and auditing of that expenditure, carrying out value-for-money studies and reporting the results of those to the Parliament.
It is only a framework. For the reasons I have given, the Parliament must be responsible for the detail. In framing that detail, it can incorporate—if it so wishes—the suggestions featured in these amendments, such as the establishment of a Committee similar to the Public Accounts Committee. I have no hesitation in saying that I hope that the Parliament will do that. My experience as a member of the Committee was excellent, and it does invaluable work. However, the Parliament should be able to decide on the best way forward, even though my preference would be to go for a Public Accounts Committee.

Mr. Salmond: From the initial discussions that have been held in the consultative committee that the Minister is chairing, does there not seem to be common ground across the political parties to have a Committee structure in the new Parliament which is more powerful and effective than the Committee structure in this House?

Mr. McLeish: I note the hon. Gentleman's sentiment; we should like that to happen. No one can argue that the traditions of this House have not been well served by its auditing, accounting, controlling and monitoring procedures. In some respects, we have an opportunity in the Parliament in Edinburgh to build on this House's success. I shall return to matters such as the designation of accounting officers and the security of tenure of the chief auditor.
Let me be absolutely clear that there is no difference between the Chairman of the PAC and the Government on the principle of accountability to the Parliament. However, we do differ significantly on how the principles should be put into practice. It is vital that the Parliament holds the Executive to account. But that is its role—and not one which this House should attempt to usurp.
Earlier, we had a discussion about expenditure. The Government believe that the control and scrutiny of the expenditure of the Scottish Parliament should be a matter for the Parliament in Edinburgh. Control and scrutiny of the resources given to the Parliament will still be vested in this Parliament. The Parliament in Edinburgh will be

in charge and will be responsible for what it spends money on, but we must make sure that the grant is properly accounted for and monitored after we have the assigned budget and after the money is given to the Scottish Consolidated Fund. The Bill provides for that.
The House should not attempt to set out in every detail how the Parliament should go about this task. It will be able to take the best of what we have to offer, but it must be free to adapt the details to its own circumstances.
We shall ensure that the Parliament and Executive are given the best possible advice in these matters. As I have discussed with the Chairman of the PAC, we have established a consultative steering group and we are setting up an expert panel, which will include the National Audit Office. It will, of course, be up to the Parliament to decide for itself on the basis of the advice it has on the final shape of the arrangements. However, it is a sign of intent and a way of going forward.

Dr. Fox: It is not a matter of "usurping" the Parliament's power—the Minister used that word. However, I find it strange that clause 90 gives the Treasury the ability to require Scottish Ministers to provide any information that the Treasury wants, but not any information that this House wants. The Treasury is to have that power. What mechanism will this House have to scrutinise how money is spent?

Mr. McLeish: Clause 90 suggests that, from time to time, information will be required by the Treasury. It is dealing with macro-economic policy and there is no conflict in providing such information. However, there is a very important distinction between that process and democratic debate in the House on the Scottish Parliament's expenditure programmes. Clause 90 is a matter-of-fact clause which rightly allows the Treasury to be provided with information.
Amendment Nos. 81 and 242 suggest that the House should receive a report of the Executive's spending proposals, as approved by the Parliament, before it votes the Supply for the grant that the Secretary of State will make to the Scottish Consolidated Fund. That would amount to the House's being asked to approve the Scottish Parliament's spending proposals, which is fundamentally at odds with the very essence of devolution. The allocation of resources within the overall budget is quite clearly a matter for the Parliament. It will also be a matter for the Parliament whether to vary the amount of that budget—upwards or downwards—if it uses the tax-varying power.

Mr. Dalyell: Is it not at odds with the principle that a Parliament should be able to monitor the money that it has to raise? It has the obligation of raising the money, and there is a certain principle that those who raise money have a right to monitor it. There are two conflicting imperatives.

Mr. McLeish: I do not see the conflict between the imperatives. Supplying resources from Westminster is one issue; the Scottish Parliament spending those resources is another issue. There are systems—in an assigned budget, which is processed in the House, in Supply estimates and in an annual appropriation—whereby the Comptroller and


Auditor General will have access, thereby dealing with the central point of the resources that are passed, through grant, to the Scottish Consolidated Fund. The systems would separate Supply from spending proposals, and we believe quite firmly that spending resources in the Scottish Parliament should be a matter for the Scottish Parliament.

Mr. Grieve: I appreciate the hon. Gentleman's point, but there is a problem. I accept that, once the principle of devolution is realised, decisions on how to spend money in the devolved spheres in Scotland will be taken by the Parliament. However, suppose that there are instances in which it is observed not that the principle of expenditure is wrong—as that cannot be questioned—but that the manner of expenditure is wholly inefficient, and that our constituents' money is being channelled in that way. Is that not the nub of the issue? Is there not a need for some mechanism to allow scrutiny in the House?

Mr. McLeish: That is not the nub of it. If we are involved in serious devolution, the central issue, which some hon. Members find more difficult to grasp than others, is that—although we are talking about resources raised by taxation and dealt with by this Parliament in a grant to the Scottish Consolidated Fund—a new set of accounting and auditing procedures will be required which will be the responsibility of the Scottish Parliament. I very constructively make the point that there will be no great desire on behalf of anyone in the Scottish Parliament to do anything less than is done at Westminster. Indeed, in the context of United Kingdom politics and Scottish politics, a special premium will be placed on making significant improvements.
Direction of accounts is dealt with by amendment No. 244 and new clause 3, which suggest the form of accounts, and how they should be constructed and directed by the Treasury. If the Parliament is to hold the Executive to account, it follows that it, and not some external source, should decide on the details of accounting. As I said, we will make available to the Parliament the best advice on those matters.
The right hon. Member for Haltemprice and Howden raised the important matter of the designation of accounting officers, which is proposed in amendment No. 244 and new clause 5. We accept the principles that lie behind suggestions that the Parliament should be able to examine officials who may be responsible for misspending and waste, and that officials should be given a clearly separate role as part of the checks and balances necessary for the proper operation of the Executive. Those principles work well in scrutinising expenditure in the House.
The Scottish Parliament will, of course, have adequate power to legislate on those matters, and it can provide for the appointment of accounting officers if it so wishes. However, given the concerns of the right hon. Member for Haltemprice and Howden, I am willing to give the matter further consideration.
The second important point is security of tenure of the auditor. We have no quarrel with the principle of security of tenure suggested in amendment No. 244 for the person appointed to carry out, or supervise, the audit of the

accounts. Clearly, that person must be free from control or pressure from either the Parliament or the Executive; and we have already included provision in the Bill for him or her to be independent of both. However, given the concerns that have been expressed, I will undertake to consider whether there needs to be further provision in the Bill to secure his or her independence. I hope that the right hon. Member for Haltemprice and Howden will accept that in the spirit in which it is intended.
We think that the proposal in amendment No. 244, on the independent auditor's estimates of income, expenditure and remuneration, is unnecessary. The Parliament itself can make the necessary provision for the submission of estimates and provisions for payment of expenses and salary. The Bill has been drafted to allow the Parliament to vote money directly to the auditors, rather than to have them rely on the Executive.
The establishment of Committees is dealt with in amendment No. 257. The suggestion that the Parliament must have a Committee similar to the House's PAC seems to be at odds with the principle of devolution. There is no doubt that the Parliament will want to have a Committee that embraces the functions performed in the House by the PAC, although it may not be called a Select Committee on Public Accounts; other terminology may be used. However, we accept the spirit of the suggestions that have been made on the matter. Personally, I will have no trouble in establishing a central focus for our activities in the new Parliament.
The Parliament must consider both the accounts and the auditor's reports. The Bill already provides for that. However, how it does so and its Committee structure will be up to it. There is nothing to stop it having the equivalent of a PAC. Imposing one on it will carry with it unnecessary inflexibility. Clearly, the precise arrangements should be for the Parliament to decide.
New clause 4 proposes that the Parliament's Standing Orders should make provision for arrangements for scrutinising the accounts of the Executive and for carrying out value-for-money studies. We think that that is unnecessary. Clause 66 already makes adequate provision on both those matters. The Parliament must make provision by or under an Act, setting out the detailed arrangements in those matters. Although it may be possible to encompass some of the arrangements in Standing Orders—such as consideration of accounts and reports by the Parliament—those are unlikely to be sufficient by themselves. Legislation would be a better vehicle to deliver all that would be required.
Most of the points so far deal with suggestions designed to ensure that the Parliament has adequate machinery for calling the Executive to account. We appreciate those suggestions, and I shall ensure that my officials take them into account in preparing advice to be put, in due course, to the new Executive and the new Parliament. Generally, however, we do not believe that the proposed level of prescription is necessary or desirable, or consistent with the thrust of our devolution proposals.
Amendment Nos. 80 and 246 and new clause 3 deal with the locus of the Comptroller and Auditor General, by providing that he should audit the accounts and retain his powers to undertake value-for-money studies and to report results of those activities to the House, and by having the PAC examine relevant officials. Clearly, that would conflict with the principles that I have stated—that


it is for the Parliament to hold the Executive to account. To have the House attempt to do so at the same time would only fudge accountability; it would not clarify it.
Moreover, any circumstances whereby the House and its Officers undertake investigations into the Scottish Executive, or any other body that is accountable to the Parliament, could only be a potential cause of conflict between the two Parliaments. We did not seek to impose dual auditing when we established the devolved administration in Northern Ireland; nor does the Comptroller and Auditor General audit the accounts or conduct value-for-money studies in local authorities.
I understand the argument that public money—money provided by the House—is at stake. However, the accounts of the Supply grant for the payments to the Scottish Consolidated Fund will be audited under existing legislation by the Comptroller and Auditor General, laid before the House and open to examination by the PAC. The Bill provides for the Secretary of State to account for other transactions that he may undertake in short-term lending to the Executive and in handling repayment of outstanding loans obtained from the National Loans Fund. Similarly, the Comptroller and Auditor General will audit those accounts and lay them before the House.
Amendment Nos. 83 and 242 are designed to ensure that the Secretary of State is satisfied that adequate arrangements are in place before he makes any payments to the Consolidated Fund. It will be important for the Parliament to put in place the necessary rules required—not only under clause 66 but under clause 62—before it takes on full responsibility for accounting and audit. Moreover, it will be important to ensure a smooth transfer of the audit function, particularly if the transfer of executive responsibility occurs during financial year. We will want to present to the House as soon as possible our proposals on transitional arrangements, which will deal with those very important points. We strongly believe that we must have proper procedures in place in Edinburgh before we ask the House to transfer those accounting and auditing responsibilities. I think that that is right, and we will certainly ensure that it will be done, by means of an order.

Mr. David Davis: I thank the Minister for giving way. He knows that I am disappointed by his response. There is no doubt that we differ on matters of principle. Nevertheless, may I take the opportunity to thank him for his courtesy and his time in listening to our case and for some of the amendments that he hopes to implement, particularly in respect of the interim arrangements?
I do not propose to press my amendments, although the Minister may expect to hear more from me on the issue for as long as the Bill makes progress through the House and another place. I shall be surprised if the issues, which are of serious constitutional significance, do not arise again in another place.

Mr. McLeish: I thank the right hon. Gentleman for his intervention. He knows that we will discuss the issues many times before the Scottish Parliament is established.
Let me briefly complete my remarks about the amendments under discussion. The practical effect of amendment No. 296 would be that the Parliament was unable to provide for the salaries and allowances of Members of the Scottish Parliament unless it made them

a statutory charge on the Scottish Consolidated Fund or provided for them to be paid by the Scottish Ministers. Also, it would not be possible for the expenses of the parliamentary corporate body to be paid. It would also mean that the Parliament was unable to vote money directly to the independent auditor and could only arrange for him to be paid by the Administration or for his expenses to be a charge on the fund.
While amendment No. 297 seems attractive, it is both unnecessary and undesirable for the following reasons. The Scottish Parliament could not effectively budget to live outwith its means, as the Scottish Executive will have no borrowing power on their own account other than the short-term borrowing provided for at clause 63. Moreover, even the short-term borrowing is repayable under such terms as the Treasury may determine—including the time scale for repayment.
Briefly, clause 66 provides for robust financial arrangements where necessary, while leaving the Scottish Parliament the maximum freedom to determine its own procedures. I hope that I have taken seriously the matters raised by hon. Members. I have benefited from the discussions with the right hon. Member for Haltemprice and Howden. Obviously, we shall have further discussions and when we have reflected further on particular points, we shall bring them back before the House. With that contribution, I hope that the amendment will be withdrawn.

Mr. Dalyell: I shall resist the temptation to enter into arguments that clearly began more than a quarter of a century ago in St. Andrews university. We shall leave that aside.
Perhaps in one sense there are two categories of hon. Member: those who have been fortunate enough—as the Minister and I have—to serve on the Public Accounts Committee and those who have not. I served under three Chairmen: Harold Wilson, John Boyd-Carpenter and Douglas Houghton and I learnt a great deal from them. My hon. Friend has obviously learnt a great deal from his time on the PAC and I accept that he accepts the spirit of what has been said.
I suppose that my hon. Friend will have further discussions with the audit department. He and I know the importance of transparency, as does anyone who has served on the European Parliament. I served on the Budget Committee and the budget sub-committee under two German chairmen and I learnt a great deal about the importance of transparency. It will have to be worked out. Do I understand that much of the work will be referred to the consultative steering group?

Mr. McLeish: indicated assent.

Mr. Dalyell: My hon. Friend indicates assent. Let me make it clear that I have never ever said—during the referendum or on any other occasion—that the calibre of Members of the Scottish Parliament would be any less than that of right hon. and hon. Members. I have never said that. I am sure that they will be as capable as we are of performing tasks of scrutiny. That is not the issue. The issue is that they will be under tremendous political pressures to satisfy expectations that have been raised, and that means money. I return to the real problem that



those who raise money expect to do some monitoring, in one form or another, of the way in which the money is spent.

Mr. Wallace: Does the hon. Gentleman agree that if, as he suggests, the money might well be tight, there might be a great premium on those serving in the Scottish Parliament to make sure that the money was spent effectively and efficiently, and that might mean all power to a PAC-type body that would be monitoring the expenditure?

Mr. Dalyell: I agree with that, with the rider that people will always want more. Time is running out, so, with the great satisfaction of the spirit of my hon. Friend's reply and his obvious interest in the matter, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

It being a quarter to Nine o'clock, THE CHAIRMAN, pursuant to the Order [9 February] and the Resolution [10 February] put forthwith the Questions necessary for the disposal of the business to be concluded at that hour.

Clause 61 ordered to stand part of the Bill.

Clause 62 ordered to stand part of the Bill.

Clause 63

BORROWING BY THE SCOTTISH MINISTERS, ETC.

Mr. Jenkin: I beg to move amendment No. 298, in page 26, line 37, after '(1)', insert
'Subject to the approval of the Chancellor of the Exchequer,'.

The First Deputy Chairman of Ways and Means (Mr. Michael J. Martin): With this, it will be convenient to discuss the following amendments: No. 299, in page 26, line 37, leave out 'Secretary of State' and insert `Treasury'.
No. 300, in page 27, line 1, leave out 'Secretary of State' and insert 'Treasury'.
No. 301, in clause 64, page 27, line 14, leave out `increased'.
No. 302, in clause 65, page 27, line 24, leave out from `sterling' to end of line 25.

Mr. Jenkin: In a sense, the debate on clause 61 was one of the most electrifying debates so far in the Committee because it has exposed some of the fundamental differences in the way in which different parties and hon. Members regard the Scottish Parliament and how it should relate to Westminster.
When one considers the import of the issues that have been discussed this evening, it is almost breathtaking that only a handful of Labour's gargantuan strength is present in the Chamber in what should be a momentous debate. We are discussing the issues that will determine whether the new Scottish Parliament and the new devolution settlement prove to be as stable as we heartily wish them

to be, or whether the unsettled will of the Scottish people and the uncertain relationship between Westminster and Edinburgh lead to disaster.

Mr. Salmond: Will the hon. Gentleman give way?

Mr. Jenkin: I have hardly started and I am sure that I shall say a great deal that will provoke the hon. Gentleman.

Mr. Salmond: rose—

Mr. Jenkin: If the hon. Gentleman really insists, I am flattered that he already feels provoked.

Mr. Salmond: The hon. Gentleman has made exactly the point that puzzles us. He draws attention to the lack of massed ranks on the Government Benches. He has behind him only five hon. Members in total. If the matters are as overwhelmingly important as he sets out, where are his hon. Friends to back up his argument?

Mr. Jenkin: I accept that this evening, the hon. Gentleman's party is represented in a higher percentage than any other, but it has more of a vested interest in the debate than any other party. A higher percentage of Conservative Members than of Labour Members are here.

Mr. Malcolm Savidge: But none of them represents Scotland.

Mr. Jenkin: There are no Labour Members present representing English or Welsh constituencies. As it is a United Kingdom issue, if the Conservative party had Scottish Members of Parliament, every single one of them would be here. [Laughter.] The hon. Member for Aberdeen, North (Mr. Savidge) is so easily amused. I am told that laughter is good for the health so I am delighted to have contributed to his good health. We are dealing with momentous issues. It is the legislation that Labour Members so passionately desired.

The First Deputy Chairman: Order. What the hon. Gentleman has said so far has had absolutely nothing to do with the amendment. It is important that he addresses the amendment.

Mr. Jenkin: I beg your pardon, Mr. Martin. I was sidetracked.
If clause 61 is the wedge, clause 62 is the crack in which the nationalists will shove the wedge. If the relationship between Westminster and the Scottish Parliament comes under strain, the consequences will bulge out in terms of the money that the Scottish Parliament wants to spend, but does not have.
We heard earlier an example of the gulf of misunderstanding between Scottish and English Members over the merits of our respective road systems. That may seem a trite point, but when English Members said that they believed that their roads were less well funded than the roads in Scotland, they were greeted with laughter and derision by Scottish Members.
We could step back and say that that misunderstanding merely represents our different perspectives. However, such differences—and, dare I say, contempt for others'


points of view—which have hitherto been expressed behind the closed doors of Cabinet collective responsibility, will now be exposed in all their ugliness in open party political debates in the disputes between Westminster and Edinburgh, with all the lack of tact that modern political debate and the language of politics usually lead to.
As the relationship degenerates, the Scottish Parliament will, perhaps, come under increasing political pressure to spend more money. It will come under pressure from the continuing debate in Westminster on funding and the Barnett formula, which might mean a progressive annual loss in grant—indeed, the Scottish Office has lost grant in the spending round for next year. As that process continues, the Scottish Parliament and Executive may find themselves, in a few years' time, with £1 billion or £2 billion less than they currently have.

Mrs. Laing: My hon. Friend referred to the relative spending on roads and infrastructure in Scotland and in England. Is he aware that a large proportion of the money that has been spent on new roads in Scotland in the past decade has come from the European Community? Once there is a Scottish Parliament, Scottish business and industry may be disadvantaged because of their inability to negotiate in the European Community as strongly as before.

Mr. Jenkin: I assure you, Mr. Martin, that I shall not be drawn down that path, but I give an example of the way in which money can be withdrawn from Scottish expenditure programmes. The objective 1 status of the highlands and islands is under threat. [Interruption.] That has everything to do with devolution, the clause and the borrowing powers of the Parliament. When expenditure falls short of the expectations that the Scottish Parliament believes should be fulfilled, borrowing will surge.

Mr. Alasdair Morgan: At the risk of creating a precedent and addressing the amendments, may I ask the hon. Gentleman how the alleged wedge and crack will be cured by substituting "Treasury" for "Secretary of State" in the clause, as suggested in amendments Nos. 299 and300?

Mr. Jenkin: I am happy to explain that the amendments are probing—the hon. Gentleman should give me credit for saying that with a straight face. We tabled them because we wanted to explore the nature and implications of the Parliament's borrowing powers.
As the relationship between London and Edinburgh degenerates—unlike the Scottish National party, Conservative Members do not want that to happen; we want a good relationship—what is likely to occur? The structural funds for building roads may be withdrawn. [Interruption.] The hon. Member for Perth (Ms Cunningham) may scoff, but that was reported in the newspapers this morning.
When the United Kingdom Parliament considers health service expenditure in Scotland—it is 24 per cent. higher per person in Scotland than in England—it will argue for a fairer distribution of health resources. As the hon. Member for Banff and Buchan (Mr. Salmond) pointed

out, the money that was awarded last year to deal with waiting lists was not fully distributed in Scotland in accordance with the Barnett formula.

Mr. Alasdair Morgan: indicated assent.

Mr. Jenkin: I see the hon. Member for Galloway and Upper Nithsdale (Mr. Morgan) nodding. That was because those moneys were distributed to address a particular issue—waiting lists. Waiting lists were shorter in Scotland, so more money was given to England—that was not in line with the Barnett formula. That is the way in which this issue will fester.

Mr. Swayne: Does my hon. Friend agree that the key point is that the social problems, such as unemployment, in Scotland are in many respects more acute than they are in England? It is all very well for the Westminster Government to talk about tough decisions, but Members of the Scottish Parliament will find themselves up against the rough end of those decisions, and will be keener to take inappropriate action to deal with the problems.

The First Deputy Chairman: I hope that the hon. Member for North Essex (Mr. Jenkin) will discuss the amendment rather than respond to that intervention.

Mr. Jenkin: My point—it is relevant to the amendments—concerns how the Executive in Scotland would deal with what they regarded as a shortfall of payments. That brings me to amendment No. 301, and the £500 million borrowing limit, which we do not believe should be increased. As the explanatory note explains, the provisions in clause 63 are for short-term borrowing requirements. Towards the end of the financial year, public sector bodies very often find that they have overspent; if they have a borrowing limit, they will use it to the full or extend their borrowing by delaying payment to their creditors, and so start the following financial year with a further deficit.
One can imagine the Scottish Parliament using its short-term borrowing facility to continue paying for programmes that were not funded by the Secretary of State, and to tide it over until the beginning of the following financial year.

Mr. McLeish: indicated dissent.

Mr. Jenkin: I see the Minister shaking his head. If he can clarify that point, the amendment is serving its purpose.

Mr. Swinney: The hon. Gentleman made a point about public corporations and other bodies increasing their borrowing towards the end of the financial year. My experience has been almost the opposite, with public organisations trying to spend budgets towards the end of the financial year. Can he give us any evidence to support his claim?

9 pm

Mr. Jenkin: Yes. It is a well-known fact that—[Laughter.] I do not know why the hon. Member for Perth is scoffing in that way. It is a well-known fact that when hospital boards are struggling to treat as many patients as


possible, they delay payments to keep beds open. That has been one of the complaints. Year after year, hospital trusts in England and health authorities, whether in Scotland or England, finish the year with debts that they should not have, which they carry forward into the next financial year and then have to pay off as well as managing their budgets. That is a common problem. There is no reason to believe that the Scottish Parliament will not have similar problems as it will be dealing not merely with hospitals, but with schools and everything else. The Scottish Parliament will need to raise more revenue. Even if it raises the tartan tax, the United Kingdom debate about the Barnett formula could well carry on whittling away the Scottish Executive's budget.

Mr. McLeish: We are not doing that.

Mr. Jenkin: In that case, why was the waiting list money for the national health service—it is called the national health service—not distributed according to the Barnett formula? The Department of Health and the Treasury thought up a different pretext for distributing it, so that they could distribute more to England, where the waiting list problem was, than to Scotland. If the Minister disputes that, he also disputes the evidence that other hon. Members have put to the House in the past.
I am describing a degenerating scenario. On many occasions, the Secretary of State has invited us to consider the worst case scenario. I invite the Committee to look at the very worst case scenario—a Liverpool scenario. In that case, a local authority wilfully set an illegal budget, borrowed illegally and carried out expenditure programmes for which it had no funding, which put the authorities in an extremely difficult situation. That was only a local authority.
Under those circumstances, the borrowing limits set in the clause would be likely to be ignored. There is no guarantee that the borrowing limits in clause 64 would be respected. In such circumstances, what powers would this Parliament have? The Minister may well tell us that we would legislate to stabilise the situation, but as we would be dealing not with a local authority, but with a Scottish Parliament, of which a substantial proportion perhaps regarded itself as autonomous, we could be on the way to a serious conflict.
I shall ask the Minister a few questions about the reasons for the borrowing power and how it is expected to work. What would the borrowing be for? What relationship would the borrowing have with local authority borrowings? How would the Parliament supervise local authority borrowings? How would the liabilities be incurred—would the Parliament issue its own loan notes or would there be overdraft facilities and, if so, would they be borrowed from a bank or directly from the Secretary of State? Are we postulating a scenario in which the Secretary of State would ring the Parliament and say, "Sorry, you'll have to borrow a bit because the cheque is in the post"? What if the Scottish Executive should default on their borrowings? What measures are made available in the Bill to deal with that? Why a limit of £500 million? Why not less, or more? Why should we not expect the Scottish Executive to build up a reserve rather than depend on short-term overdrafts to deal with

cash flow fluctuations? What measures would be available under the Bill if borrowing limits were exceeded? How would the Government, or the United Kingdom Parliament, force a future Scottish Executive to live within their borrowing constraints? Who would be liable for borrowing that turned out to have been incurred illegally? In a local authority, that is clear as the councillors are liable. The Minister should answer that question.
Our amendments are purely for clarification. Amendment No. 298 would make it clear that the borrowing should be subject to the approval of the Treasury and the Chancellor of the Exchequer rather than the Secretary of State. Amendments Nos. 299 and 300 are for the avoidance of doubt and establish that the Treasury should make the decisions. Amendment No. 301 questions whether there should be permission to raise the borrowing limits simply by order or whether it should require primary legislation. There seems to be no reason why the Parliament should not be invited to build up a reserve, rather than depend on short-term borrowing to deal with cash flow fluctuations.
Finally, in tabling amendment No. 302 to clause 65, we would simply ask why the Bill should contain a power for the Scottish Parliament to borrow in any currency other than sterling. Why would the approval of the Treasury ever be needed for that Parliament to borrow in a foreign currency?

Mr. Dalyell: From the seat now occupied by the hon. Member for North Tayside (Mr. Swinney), the late Enoch Powell spent not minutes, but hours on the borrowing requirements, with great effect and great justification. This is a very important issue.
The excellent notes on clauses provided by the Scottish Office say, on clause 63:
Amounts required for repayment (of principal and interest) are charged on the Scottish Consolidated Fund. The clause also prohibits members of the Scottish Executive from borrowing except under this clause or under any specific power in an Act of Parliament.
What Act of Parliament?
I do not want to go over all the questions asked by the hon. Member for North Essex (Mr. Jenkin), but may I repeat his question on default? There could be serious over-borrowing—in good faith, initially—by Departments desperate to fulfil political imperatives in social policy, housing, education and local government. We have to be told what happens if there is a real difficulty in Holyrood on default.
In view of the time and because I hope that we shall have an opportunity to ask questions on later clauses—particularly clause 66—I shall leave my contribution at that. I had some of the same questions—arrived at from a different direction—as the hon. Member for North Essex. To save time I shall not repeat them, but I look forward to hearing the answers.

Mr. Swinney: I shall keep my contribution brief. I start with a point of agreement. Like the hon. Members for North Essex (Mr. Jenkin) and for Linlithgow (Mr. Dalyell), I should like to understand the position on local authority borrowing. It is not clear how that will be affected. I look forward to the Minister's answer.
The hon. Member for North Essex said that these were probing amendments. I suspect that that means that we can say anything that we like. He almost gave us a lecture


on the near inevitability of the Scottish Parliament being profligate, with heavy borrowing going out of control and no brakes on the system.

Mr. Jenkin: I did not say that.

Mr. Swinney: That was the implication.
In 1991–92, the public sector borrowing requirement was £21.7 billion; in 1992–93, it was £44.5 billion; in 1993–94, it was £50.9 billion. I do not remember any Act being breached or any ceiling being reached. Parliament accepted the Executive's view that that level of public sector borrowing was necessary. A lecture from the Conservatives about the inevitability of the Scottish Parliament's finances going out of control is a bit rich.

Mr. Dalyell: The issue was not inevitability. Such a scenario could realistically happen. I am not saying that it is inevitable, but we have to think seriously about the danger.

Mr. Swinney: I did not associate the hon. Gentleman with the remarks about inevitability. I accept the seriousness with which he made his arguments. He has raised some valid issues, as he did in the debate on public accounts. Inevitability was inferable from the remarks of the hon. Member for North Essex.
My interpretation of the Government's proposals is that they create fairly limited opportunities for sensible financial management and recognise that there will be a bit of ebb and flow in normal public finances. Businesses manage with a cash flow and businesses have borrowing arrangements with their bank managers. The Government's proposals are not dissimilar.
I am concerned about how borrowing is constrained. I get the impression that a ceiling is being applied, with fairly tight constraints on borrowing. I accept the point of the hon. Member for Linlithgow about the definition in the legislation that constrains borrowing. That is a serious point which must be addressed. On the whole, the proposals are limited in structuring the finances of the Scottish Parliament for the business that it will have to transact.

Mr. Donald Gorrie: I associate myself with the remarks of the hon. Member for North Tayside (Mr. Swinney). Conservative Members may not spell it out in words of one syllable, but time after time, the implication of their speeches is that the Scottish Parliament cannot be relied on to act in a civilised manner and that all sorts of constraints must be put on it. The Scottish Parliament will act as well as any other Parliament and, we hope, better than most. It will run its affairs intelligently.
Clause 63(1) refers to
temporary excess of sums paid".
What is temporary?
There is also the ceiling, the amount of money that the Scottish Parliament may borrow. What if it decides to fund more of its activities in what might be called a traditional fashion rather than going in for private finance initiatives and other methods of trying to acquire capital that does not count against the system? What if it pays for hospitals, school improvements and the investment

that the Scottish water and sewerage industry so desperately needs by Government borrowing? Local authorities have been mentioned. How will all that be managed? Will it be possible for the Scottish Parliament, within the apparent ceiling of £500 million, to deal with that? Some explanation of Government borrowing to fund such activities and organisations, as well as local government, would be helpful.
On the Conservative amendments, I do not see how making things subject to the approval of the Chancellor of the Exchequer and inserting "Treasury" instead of "Secretary of State" will fundamentally alter the finances of a Scottish Parliament or the control thereof. The amendments will not achieve what I think is their goal. The Conservatives appear not to want to allow the Scottish Parliament to increase its borrowing.

Mr. Heald: The hon. Gentleman may have noticed that under clause 90, all documents and information about the finance of the Scottish Parliament are to be given to the Treasury. In those circumstances, should not it be in charge of approving borrowing or loans? There is a synergy between information being provided and approval being given.

Mr. Gorrie: I have never been privileged to be a member of a Government, but I assume that the Secretary of State mentioned in the Bill would occasionally talk to the Treasury, exchange faxes or e-mails, or whatever is used in future, and sort the matter out. Under the Bill, the Secretary of State is supposed to be the liaison between Westminster and the Scottish Parliament, so presumably he would deal with the matter.
The Conservatives are concerned that the Scottish Parliament will run riot and borrow everything in sight, but it has to borrow from the Treasury. As far as I can tell, the Treasury has to give its approval. According to Tory dogma, the Treasury is all that is sound, sensible and reliable—surely it will not allow the Scottish Parliament to go mad and borrow too much.

Mr. Ancram: I think that the hon. Gentleman has fallen into the trap of the Bill by assuming that the Secretary of State mentioned in it is the Secretary of State for Scotland. In fact, right through the Bill, the Secretary of State is undefined and can be any Secretary of State, including, if necessary, the Chancellor of the Exchequer. It makes a nonsense of the hon. Gentleman's case, which is based on who talks to whom, if the Secretary of State in the Bill is not defined as being the Secretary of State for Scotland, so I hope that he will support our amendment to that effect later in the Bill.

Mr. Gorrie: I do not accept that point. The Secretary of State is presumably the designated Secretary of State in whatever Government may exist.

Mr. Ancram: No.

Mr. Gorrie: No, it is the Secretary of State, so—[Interruption.]

The First Deputy Chairman: Order.

Mr. Gorrie: As I understand it, it is the Secretary of State who is authorised to deal with these matters, and I


should think that, whatever his or her title, he or she would be capable of talking to the Treasury, so I do not accept the point at all. The Conservatives should accept that they cannot claim that the Scottish Parliament would run rampant, when it will have to borrow money from the Treasury, which is all that is good and great in the eyes of the Tories.

Mr. Swayne: If the hon. Gentleman accepts that, whichever Secretary of State it may be, he or she will in any event be capable of speaking to the Treasury—indeed he or she will have to speak to the Treasury—why leave the Bill as it stands, with the requirement to deal with the monkey rather than the organ grinder?

Mr. Gorrie: I am not really an expert on organ grinders and I do not understand the hon. Gentleman's point. The Bill says that there is to be a person who is to deal with Scottish affairs in relation to Westminster, therefore—whatever his title may be in future—surely that person should deal with this matter.
My last point—I hope to be allowed to get through it without further interruption—is that the Conservatives' anti-Europeanism has surfaced even in a Bill about Scotland. The Scots are not to be allowed to borrow ecus or EMUs or whatever. By the time the Bill takes effect and the Scottish Parliament is up and running, sterling may have disappeared, in which case the Scottish Parliament will not be allowed to borrow anything at all.

Mr. Jenkin: If we were to enter the single currency, there would be legislation to provide that any reference to sterling in any Act of Parliament would henceforth be taken to refer to euros. I did not want to labour the point, because every time we raise a problem we are told that we must be against the Scottish Parliament, but there is a potential problem. Some local authorities have gone in for curious short-term financial instruments because they were convenient and the authority thought that that would be a good way of earning a little extra revenue. We simply ask: what is the purpose of having a power in the Bill for the Scottish Parliament to borrow in another currency, when we cannot foresee any circumstances in which it might want to do so? The Minister may well come forward with some sensible ideas, but the hon. Gentleman's suggestion is simply ludicrous.

Mr. Gorrie: Somebody much brighter than me said, "There are more things in heaven and earth than are within your imagination." The fact that Conservative Front Benchers cannot conceive of a circumstance in which the Scottish Parliament might want to do something does not mean that such a circumstance cannot occur. The future of the United Kingdom is not to be circumscribed by the limited imagination of a few ex-Scots.

Mr. Syms: The hon. Member for Linlithgow (Mr. Dalyell) has raised some good points about a critical part of the Bill.
In comparison with earlier clauses relating to accountability for money, the terms of clause 63 are restrictive by most standards. I spent 14 years in local government, and I believe that many local government treasurers would be horrified at a limitation on borrowing

powers. According to the notes on clauses, there will be a limitation of £500 million in relation to the turnover of money by the Scottish Parliament, and although that is considerable, it is not a lot of money.
Our amendments are probing, and we are trying to be helpful. I presume that the clause is concerned mainly with the operation of cash flow in terms of the money available. What does "temporary excess" mean in clause 63(1)(a)? Are we talking about smoothing outflows throughout a 12-month period or beyond that? For example, some health trusts have run deficits and been allowed to roll them over. The totality of money available to the Scottish Parliament will be considerably different from that suggested if the Government take a relaxed view about the annual rollover of funds.
As for the working balance of the fund, I would imagine that one of between £400 million and £500 million would not be too bad. Perhaps the Minister can confirm that that is what the Government have in mind. Subsection (4) of the clause states
A member of the Scottish Executive may borrow money only under this section or under any power conferred by an Act of Parliament.
In common with the hon. Member for Linlithgow, I should be interested to learn under what other Acts money could be borrowed. It may be a good thing to start off by restricting borrowing, because I presume that any borrowing will have an impact on the public sector borrowing requirement. In the United Kingdom context, therefore, one cannot totally ignore the level of borrowing by the Scottish Parliament.
We live in a country that has one of the most sophisticated financial centres of the western world, the City of London. Edinburgh is also a major financial centre of the nation. Many sophisticated financial instruments are used as methods of financing various projects. According to the notes on clauses, borrowing is reasonably restricted—in effect, £500 million via the Treasury. How will that borrowing relate to leasing agreements? In local government in particular, leasing agreements are made on cars and equipment. On occasions, assets have been sold and leased back. Will such practices be covered within the £500 million of borrowing? An authority's capacity to adjust its budget depending on whether it has sold the parking meters, bits of road or major public buildings is considerable.
We live in an age of derivatives and various other financial instruments. The hon. Member for Edinburgh, West (Mr. Gorrie) mentioned the private finance initiative, which has implications for taxpayers within Scotland. We are trying to probe the limitations on the treasurer or a given member of the Executive who is responsible for finance.

Mr. Dalyell: The hon. Gentleman referred to the Edinburgh finance houses; in practical terms, they represent an extremely important subject. There will be an enormous temptation on the Members of the Holyrood Parliament to press for extra borrowing powers. As surely as night follows day, some members of those finance houses will say, "Why don't you fight to extend the borrowing powers? We would love to accommodate you. We will overcome your short and medium-term problems in any sector that you care to mention. We have the money, and we will do that." There will be great


frustration on the part of the Holyrood Members if they are not able to extend the borrowing powers as offered to them by the Edinburgh financial institutions. Therein lies a considerable pressure to extend the borrowing powers.

Mr. Syms: The hon. Gentleman makes a good point. Most of the debate has been about the level of taxation and whether more resources should be pushed north of the border. Given the scale of the cash flow and the turnover of billions of pounds going through to a Scottish Parliament, it is inevitable that the person in charge of financial affairs will try to wriggle within the constraints. Those constraints seem to be reasonably fixed by the Bill. I hope that the Minister will reassure us that that is the case, as there are financial implications for the entire United Kingdom.
There may be some debate about whether the Scottish Parliament should have more borrowing powers or should have wider powers to use the financial instruments available. As I mentioned, some local authorities have sold buildings, roads, parking meters and other facilities that provide a stream of income. The way in which the Scottish Parliament progresses in terms of its borrowing capacity, leasing and perhaps using the private finance initiative will affect cash flow, education income and everything else, and determine how that assembly works.
With reference to one of the questions that will be put to the Scottish people—the question of the 3p on taxation—we heard from the Scottish National party that that relates to only a small portion of money, and we heard from Labour Members that they would not use that to start off with. If Labour controls the assembly, there will be tremendous temptations to look for financial alternatives to finance the Parliament's expenditure. Banks and other institutions, and some of the clever Edinburgh lawyers who are often mentioned in this place, would no doubt look for loopholes and methods by which to finance the political priorities over time.
I await a reassurance from the Minister that the Bill is as cast-iron as it looks. Are the borrowing powers of £500 million, primarily through the central Government of the United Kingdom, fixed? Are there clear definitions of financial terms such as borrowing, leasing and back-to-back loans? Those terms can become a jungle, and we must be clear, especially as this Parliament has a responsibility to the United Kingdom through the public sector borrowing requirement. If, as is natural, the Scottish Parliament is determined to use such flexibility as it can, that might have overall implications for resources throughout our island.

Mrs. Laing: This group of amendments is vital, as it goes to the heart of the Bill. Once again our discussion reveals the inherent conflict between the powers that the Bill gives to the new Scottish Parliament, and the powers that are reserved to this Parliament. The issues of responsibility and accountability are crucial, and we see yet more uncertainty in the Bill.
Those who want to see the Scottish Parliament succeed should not be so over-sensitive about its powers. The theme of this debate is like a discussion between a teenager and his parents: "No, I am quite able to do that for myself; "No, I want to watch what you are doing and keep an eye on you." The inherent conflict at this stage of the plan for devolution can only get worse.
It will be interesting to know whether the Minister envisages the powers of the new Scottish Parliament increasing. Are the powers given by these clauses only the basis for the powers of a Scottish Parliament? Some hon. Members on my left—they certainly are on my left—representing the Scottish National party envisage the powers of the Scottish Parliament increasing. No legislative assembly operating in any part of the world does not want to see its powers increase. All such bodies look for ways of increasing the powers that they have been given or have taken.
9.30 pm
The interesting point is that, by challenging the amendments, the Government are saying implicitly not so much that the House does not trust the new Scottish Parliament—although that has been asserted—but that they do not trust the House to exercise properly its duties in holding to account the Chancellor of the Exchequer and other Treasury Ministers for public expenditure for which Her Majesty's Treasury is responsible. Only the Chancellor of the Exchequer can answer to the electorate of the whole United Kingdom for tax that is raised from the whole United Kingdom.
We are talking about that money tonight. Funding for the activities of the new Scottish Parliament will be raised from taxpayers throughout the United Kingdom. The body that is responsible for raising those taxes, and is therefore accountable for spending them, is the Treasury through the Chancellor of the Exchequer and this Westminster Parliament.
If Parliament is raising the taxes in order to fund the borrowing, it is nonsense to say that it should not be accountable for how they are spent. I am sure that most hon. Members will agree that control of public borrowing must be the responsibility of the body that funds the borrowing.

Mr. Swinney: How successful does the hon. Lady believe the previous Conservative Government were at controlling borrowing? How effective was Parliament at restraining that Government from putting borrowing through the roof?

Mrs. Laing: I have absolute confidence in the way in which Conservative Governments controlled borrowing for 18 years until they lost control of borrowing to the new Labour Government. We shall soon see what a disaster that is for the British people, for business and for the prosperity of the whole economy.
I remind the hon. Gentleman that borrowing is a cyclical function: when the economy goes up and down, borrowing fluctuates also. There is no doubt that the former Conservative Government controlled the public sector borrowing requirement to a far greater degree than any Labour Government ever did. That was an essential part of the economy's success in the late 1980s and early 1990s. It is sad that the Conservative Government lost control of the PSBR and public borrowing on 1 May.

Mr. Alasdair Morgan: In reply to one of the hon. Lady's earlier comments, I fear that the teenager may be forced to run away from home. These amendments would


put severe and tight constraints on the Scottish Parliament, but the hon. Lady seems to be heading in the opposite direction when she talks about profligate borrowing.

Mrs. Laing: No, certainly not. I thank the hon. Gentleman, but that is not the point. There are constraints on the Scottish Parliament. The point is not where the constraints lie, but who is accountable for the money that is raised to fund the borrowing. It is not reasonable to say that anyone other than the Chancellor of the Exchequer can be accountable for taxes raised in the United Kingdom. Therefore, the amendments are logical and sensible. They can be challenged only by those who do not trust the House and Ministers of this Parliament to carry out their duties properly.

Mr. Morgan: I thank the hon. Lady for giving way once again. Surely many pieces of legislation that pass through the House enable various Secretaries of State to spend from the moneys that are available and do not always require them to refer every piece of expenditure to the Chancellor of the Exchequer. Therefore, why should the various Secretaries of State be treated any differently in this particular enactment?

Mrs. Laing: I must entirely disagree with the hon. Gentleman. Any money that is spent by Secretaries of State who are responsible to the House has come to those Secretaries of State, as the hon. Gentleman said, through the Treasury and the Chancellor of the Exchequer; those Secretaries of State are responsible to the Chancellor of the Exchequer; and the Treasury keeps—or it did until 1 May last year, in my experience—a firm grip on the spending of any Department of State.
Therefore, the hon. Gentleman simply emphasises my point. Here we have yet another conflict inherent in the system that the Bill sets up. The hon. Member for Linlithgow (Mr. Dalyell) has highlighted the conflict itself. If the inherent conflicts that we are discussing are not ironed out now, and if there is not more certainty in the Bill as to how the new Scottish Parliament's financial operation will work, those tensions will increase.
As a result of that increase in those tensions between the Scottish Parliament and the Westminster Parliament, Scottish National party Members will get their way. There will be a complete lack of confidence in the devolved Parliament because of those tensions and conflicts and, sadly, as I said earlier, that will take us down the slippery slope towards an independent Scotland. That is the great fear.
It is not the detail that matters here, but the fact that there is in the Government's attitude to the amendments a clear lack of trust between what is envisaged as the new Scottish Parliament and the Parliament at Westminster. It is that lack of trust that will cause those tensions to increase and so allow Scottish National party Members to get their way.
If we do not get the Bill straight now and allow the devolution plans to work in a reasonable and reasoned way, they will not succeed and we shall go down the slippery slope to a separate Scotland, which is not what I want to see.

Mr. Swayne: I approach the amendment much in the spirit of the hon. Member for North Tayside (Mr. Swinney). It is proper to have amendments Nos. 298 and 299, which are in the spirit of clause 90. They effectively substitute for whomsoever Secretary of State it may be, the Government reality of having to deal with the Treasury. I am not quite so sanguine as my hon. Friend the Member for Poole (Mr. Syms). The amendments will ensure that any money borrowed by the Parliament is approved by the Treasury. That provides yet another safeguard against irresponsible financial behaviour by the Scottish Parliament.
The Minister will regard my speech as that of yet another Tory who is not prepared to trust the new Parliament. I return to an earlier theme—the pressures that the new parliamentarians will be under. They will face tight financial settlements; they will be up against real social problems in Scotland; and they will be unable to secure greater funds from London. One way out is borrowing, with all the sophistication that the modern financial markets can offer. It is in that respect that amendment No. 302 is so appropriate.

Sir Robert Smith: May I follow the hon. Member for Poole (Mr. Syms), especially in the light of today's news? Let us suppose that the Scottish Parliament were to embark on a great project, such as a high-speed link under the Irish sea to Ireland, and set it up as a private sector project. If the contract contained a wee clause saying that, in the event of the whole thing going belly-up, it would be bailed out by the Scottish Parliament, would these clauses have to deal with that?

Mr. McLeish: I appreciate that the hour is getting late. To be charitable, there seems to have been some genuine confusion. However, the meaning of the clauses has been completely distorted.
The general thrust of the clauses is control—who is controlling what, and what is the effect of scrutiny? Clause 68 says:
The Secretary of State shall, for each financial year—

(a) prepare, in such form and manner as the Treasury may direct, an account of sums paid and received by him under sections 63, 64 and 67, and
(b) send the account to the Comptroller and Auditor General…

and the Comptroller and Auditor General shall examine, certify and report on the account and shall lay copies of it and of his report before each House of Parliament.
Those are circumscribed powers.

Mr. Jenkin: The Minister says that the powers in clause 68 are circumscribed. The clause is simply about provision of information and cannot circumscribe borrowing powers.

Mr. McLeish: If the hon. Gentleman reads the text of all the clauses subsequent to clauses 63 and 68, he will see that the Comptroller and Auditor General will get reports on those matters. The main point that I am trying to establish is that the powers in the Bill are extremely curtailed. Hon. Members have sought to distort them. The Bill is drafted in such a way as to ensure that the borrowing powers are housekeeping powers. I shall illustrate that point when I deal with the amendments.
May I answer some of the specific questions that were raised? The Bill does not affect local authorities' powers to borrow. The existing systems of control over borrowing by local authorities and other bodies remain in place.

Mr. Welsh: If the Scottish Parliament wanted to abolish the 75 per cent. capital debt repayment from the sale of current assets by local authorities, could it do so?

Mr. McLeish: That is not germane to the clause. The Scottish Parliament has a budget, and any steps that it takes in relation to devolved matters will have a hit on that. It will be up to the Parliament to decide. This matter concerns devolution in the sense that the block provides cash, so decisions that are taken always have a financial penalty.
Borrowing will involve a charge on the fund. We are discussing the Parliament's ability to act in an irresponsible manner.

Mrs. Margaret Ewing: I seek clarification from the Minister. Did he answer "yes" to the point raised by my hon. Friend the Member for Angus (Mr. Welsh) in the context of the 75 per cent.?

Mr. McLeish: I am dealing with clause 63. It is important to deal with the issues at stake because so many distorted comments have been made in relation to our proposals.
Leasing agreements were also mentioned. Expenditure on finance leases will count against the Parliament's budget at its capital value, as in the current public expenditure survey rules. That will reduce the money available for grant, and will not count against the borrowing limit.
There was also a question about the word "temporary". That subsection covers sums borrowed over a short time scale: days and weeks, rather than months and years. It puts the housekeeping nature of this arrangement into perspective. The clause is not meant to provide a semi-permanent loan facility to allow the Parliament or Executive to exceed its allocated budget. The phrase may be given more definition in practice by the repayment terms that are set out by the Treasury under clause 63(3), which states:
Sums borrowed under this section shall be repaid to the Secretary of State at such times and by such methods, and interest on them shall be paid to him at such rates and at such times, as the Treasury may from time to time determine.
Every subsection contains formidable checks on borrowing under the rather narrow clause 63.

Mr. Dalyell: It is perhaps unreasonable at a quarter to 10 at night to ask for an answer to the question put by the hon. Members for Angus (Mr. Welsh) and for Moray (Mrs. Ewing). Could we, therefore, have a considered letter covering that issue? It is of considerable importance to local authorities, and I am afraid that I am rather in the dark.

Mr. McLeish: We shall respond to my hon. Friend's suggestion.

Mr. Ancram: Will the hon. Gentleman send us a copy?

Mr. McLeish: Yes, I shall follow the usual courtesies.
Amendment No. 298 would require the Scottish Ministers to seek the approval of the Chancellor of the Exchequer for sums borrowed from the Secretary of State under clause 63(1). Amendments Nos. 299 and 300 would make the Treasury rather than the Secretary of State the lender under the short-term borrowing power. However, all such borrowing is also subject to the provisions in clause 64, which explicitly states that the Treasury may issue to the Secretary of State, out of the National Loans fund, the sums required by him for making loans to the Scottish Ministers under clause 63.
Clause 63 also provides that the borrowing shall be repaid to the Secretary of State on terms determined by the Treasury. That includes such matters as time scales and methods of repayments and the rates of interest to be paid.
I am satisfied that those provisions give the Treasury fairly robust powers in relation to such short-term borrowing under clause 63.
Amendment No. 301 would enable the Secretary of State to reduce as well as increase the ceiling of £500 million for the short-term borrowing power. The ceiling of £500 million specified in clause 64(2) is intended to be just that an upper limit. We expect that borrowing will be well within that limit the majority of the time. Clause 64(3) simply enables that amount to be increased, with the consent of the Treasury, from time to time should it be necessary, such as to deal with unforeseen circumstances.

Mr. Heald: If the Treasury is responsible for an issue such as the repayment of debt under clause 63(3), it is usual for the statutory provision to specify the Treasury rather than the Secretary of State, as in clause 90. If the Treasury is to be the relevant Department, why should not the Bill say so?

Mr. McLeish: The Secretary of State is much closer to accounting officers, so the strategy used in clause 63 is sensible, given that the Treasury will underpin the arrangements.
Clause 101 provides that a statutory instrument containing an order under clause 64(3) shall be an affirmative instrument of the House of Commons. There will be ample opportunity for proper consideration by hon. Members.
Amendment No. 302 would prohibit completely non-sterling borrowing by public bodies. We believe that that is too inflexible. Although we do not expect any great demand for this facility, it is necessary to allow such borrowing should it be required. It is not beyond the bounds of possibility that a public body will want to borrow from a European Union institution, and such borrowing may be available only in euros. This contingency arrangement is designed to give maximum flexibility to the Parliament in those circumstances. Given that non-sterling borrowing can have macro-economic consequences, it is only right and proper for any bodies that want to take advantage of such borrowing first to obtain the consent of Scottish Ministers, who in turn must seek the Treasury's approval. As hon. Members will know, macro-economic concerns are very much a reserved matter.
There are good financial management reasons for Departments other than the Treasury to undertake lending to public bodies. As I said earlier, Departments are generally closer to their operations and accounting officers than the accounting officer at the Treasury.
For those reasons I believe that the amendments are unnecessary, and I hope that amendment No. 298 will be withdrawn.

Mr. Jenkin: I am grateful for the trouble that the Minister has taken in responding to at least some of the points that have been made. As he knows, we will not press the matter to a Division, but I want answers to two questions that I asked about local authority borrowing. First, I asked what relationship with local authority borrowings the Scottish Parliament would have. Under the present arrangement, the Scottish Office will distribute borrowing consents to local authorities. If we are delegating the borrowing authority to the Scottish Executive to distribute, does it have to be delegated to local authorities? Perhaps, when he is dealing with the pertinent points raised by the Scottish National party, the Minister will explain exactly what the relationship is.

Mr. McLeish: The amendments do not relate to local authority borrowing.

Mr. Jenkin: I appreciate that the Minister has not been briefed on the subject, but I would be grateful if he could deal with it.

Mr. McLeish: May I make my point? We are dealing with a housekeeping borrowing requirement in clause 63; it does not affect local authority borrowing.

Mr. Jenkin: I think that I have made my point.
Will the Minister answer the other questions that I asked, which he has not answered so far? One of them was raised by the hon. Member for Linlithgow (Mr. Dalyell). What happens if the Scottish Executive or the Scottish Parliament defaults on its borrowings? The Minister also gave no explanation or rationale for the figure of £500 million. Was it plucked out of the air?
In the event of default, what sanctions has this Parliament, or the Government, over the Scottish Executive or the public bodies if borrowing limits are exceeded? How would the Treasury force the Scottish Executive to live within their borrowing constraints, or, indeed, force the Scottish Executive to return moneys that they refused to return? I realise that we are dealing with a worst case scenario, but I think those questions need to be answered.
I also asked who would be liable in the event of borrowing that turned out to be illegal. I consider that a fair question. We have strict rules relating to local authorities; what are the equivalent rules in this instance?
The Minister glossed over questions about sale and leaseback. Will the Scottish Parliament be able to enter into such arrangements? Clause 61 deals with sums received by the Scottish Parliament. Must those sums be

paid back in the repayment of loans, or, as currently obtains in the rest of the United Kingdom, must assets disposed of by Departments go back into the Treasury pot? Should there not be an obligation to repay debt on the disposal of such assets?
I do not feel that the Minister has dealt adequately with a good many questions, particularly the point amplified by the hon. Member for Linlithgow about default.

Mr. McLeish: The hon. Member for North Essex (Mr. Jenkin) mentioned the £500 million. His hon. Friend the Member for Poole (Mr. Syms) considered that a reasonable amount, and that is our judgment. It is about housekeeping—about day-to-day transactions in relation to shortfalls. I think that the position is self-evident, but remarkable distortions have been built into the clause. It is common sense: it allows the Parliament to deal with business as it ebbs and flows throughout the year. The Opposition, however, clearly find it difficult to deal with the issue without trying to distort it and to give us a stronger flavour of their reluctance to acknowledge that devolution for Scots is a serious issue.

Mr. Dalyell: There must be a question of contingency of default. I have an interest in not wanting a reply tonight because I should like to ask one question on clause 66, but will my hon. Friend the Minister write to us in the cold light of morning about the question of default? It is a real possibility—we will not say probability—and we must know one way or the other.

Mr. McLeish: My hon. Friend refers to default as a possibility. It is an entirely remote possibility. The serious issue is that this is a mature Parliament dealing with substantial sums of public funds, passed through in grant from this House. It is inconceivable that less responsibility will be exercised in the Scottish Parliament than in the House.
Comment after comment suggests that Members in the Scottish Parliament will not want to scrutinise or take the responsibility—and privilege—of spending other people's money as seriously as we do in this House. It is vital that our central proposition is acknowledged. However, if there were default, which I have described as a remote possibility, the Secretary of State can withhold grant. The charge against the Scottish Consolidated Fund is something against which the Parliament cannot vote. Therefore, there are important safeguards in every clause from 63 to 68, but I will set them out in a letter, which we will pass to the Opposition and which will illustrate entirely the implications of the points that have been raised.

Mr. Jenkin: 1 beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 63 ordered to stand part of the Bill.

Clauses 64 and 65 ordered to stand part of the Bill.

Clause 66

FINANCIAL CONTROL, ACCOUNTS AND AUDIT

Question proposed, That the clause stand part of the Bill.

Mr. Dalyell: rose—

The First Deputy Chairman: Order. Before the hon. Gentleman speaks, may I say that I am allowing the hon. Gentleman some discretion because clause 66 stand part was debated in the previous block of amendments. However, with my discretion, I shall allow him to make a brief point on clause 66.

Mr. Dalyell: I refer to the good notes provided by the Scottish Office. Subsection (4) states:
For the purposes of this section, a person is independent in relation to a function if he is not subject to the direction or control of any member of the Scottish Executive or of the Parliament in exercising that function.
Frankly, this is a query that I promised the Law Society of Scotland I would raise.
It is noted that an independent person is to be appointed with a supervisory role in respect of Scottish Ministers, the Lord Advocate and other Scottish Departments and statutory bodies. It does not appear particularly clear, however, who might be appointed as such an independent person or indeed who is precluded from appointment. For example, does subsection (4) mean that a Scottish civil servant might not be appointed or is it intended, for example, to be the National Audit Office or a similar body? I believe that my hon. Friend has been briefed on this matter.

Mr. McLeish: It is not accurate to describe the role of the independent person as supervisory. It is an audit function. The Law Society of Scotland complains that it is not clear who might be appointed. Clause 66 sets out several things that the Parliament must provide for, but it does not say what the detail should be. That is properly a matter for the Parliament. The clause sets out a minimum framework. It follows that the Parliament will decide how the audit function is organised. Clause 66(4) means that the chief audit figure may not be a civil servant of the Executive, but will be an entirely separate appointment by the Parliament. The Parliament could decide to appoint the National Audit Office to carry out the audit work, or it could set up a similar body.

Question put and agreed to.

Clause 66 ordered to stand part of the Bill.

Clause 67

EXISTING DEBT

Question proposed, That the clause stand part of the Bill.

Mr. Ancram: Will the Minister explain—perhaps in writing—clause 67(3) and (4)? He talked about good housekeeping, yet subsection (3) states:
Amounts equal to those which are to be received by Scottish Ministers in repayment of principal shall be treated as being amounts of advances".
However, subsection (4) states:
Such advances shall be repaid to the Secretary of State at such times and by such methods, and interest on them shall be paid to him at such rates and at such times, as the Treasury may from time to time determine.
How on earth will the Scottish Parliament be able to make any decision or judgments on the rate of repayment if, at the end of the day, it is totally at the discretion of the Treasury?

Mr. McLeish: As I have 36 seconds left, with the leave of the Committee I will write to the right hon. Gentleman on that point.

It being Ten o'clock, THE CHAIRMAN, pursuant to the Order [9 February] and the Resolution [10 February], put forthwith the Question already proposed from the Chair.

Clause 67 ordered to stand part of the Bill.

The Chairman then proceeded to put forthwith the Question necessary for the disposal of the business to be concluded at that hour.

Clause 68 ordered to stand part of the Bill.

It being after Ten o'clock, THE CHAIRMAN left the Chair to report progress and ask leave to sit again.

To report progress and ask leave to sit again. —  [Mr. McFall.]

Committee report progress; to sit again tomorrow.

DELEGATED LEGISLATION

Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),

DANGEROUS DRUGS

That the draft Misuse of Drugs Act 1971 (Modification) Order 1998, which was laid before this House on 15th January, be approved. — [Mr. McFall.]

Question agreed to.

Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),

RATING AND VALUATION

That the draft Valuation and Rating (Exempted Classes) (Scotland) Order 1998, which was laid before this House on 15th January, be approved.— [Mr. McFall.]

Question agreed to.

A3 Kingston Bypass

Motion made, and Question proposed,  That this House do now adjourn.— [Mr. McFall.]

Mr. Edward Davey: May I begin, Mr. Deputy Speaker, by thanking you for the opportunity to raise this issue today? The A3 Kingston bypass is worthy of debate for many reasons. For example, it is reputed to be the busiest stretch of non-motorway road in Europe. It has to accommodate large volumes of traffic on a road designed many years ago for a tiny fraction of that traffic. It is a difficult road on which to drive because the lanes are narrow and traffic is so heavy and fast-moving. Not surprisingly, there are many accidents.
These are good reasons for debating the A3 Kingston bypass, but they are not the main issue on which I wish to focus today. Instead, I want to focus on the people who live next to the A3—the communities on either side of the road which bisects my constituency. In my research and campaigning, I have been horrified by how little attention and weight is given to the needs of these people in the calculations and decision processes of the Highways Agency—the body responsible for the A3 and its service roads.
The shortcomings of the Highways Agency approach was shown recently in a report on the A3 Kingston bypass, entitled "Assessment of accidents involving vehicles leaving the main carriageway on the nearside." The report made the welcome recommendation that the speed limits on the road should be reviewed, but failed to back the case for more verge safety fencing. I believe this failure followed directly from the narrow terms to which the previous Government asked the Highways Agency to operate, and from the flawed statistical methodology the agency has to use. These have to change.
Even without such systemic changes, it is now vital that something is done to make this stretch of road safer for the people who live alongside it. These residents already live with the pollution and deafening noise from the road. It seems entirely reasonable to ask that they should at least be safe in their homes, protected from traffic accidents.
To improve safety for local residents, various actions are required. In some places, traffic-calming measures on service roads—such as Tolworth rise north—would help. Some service roads, such as Hook rise south, would benefit from a reduced speed limit. In other places, such as some stretches of Malden way, blocking the service road where it runs directly and dangerously on to the A3 might be the solution. I ask the Minister urgently to instruct the Highways Agency to consult residents on such options.
Whatever specific package of improvements might result from such a consultation, I am convinced that any safety improvement programme must contain three essential measures. First, it must provide a reduction in the speed limit, to 50 mph, along the entire stretch of main carriageway. Secondly, there must be measures to ensure proper and rigorous enforcement of such a speed limit. Thirdly, and above all else, safety fences must be installed in the many spots that are still unprotected. I argue for the urgent implementation of those three measures.
The A3 Kingston bypass is a unique stretch of road. Built before the war, compared with current standards, it is now substandard in many key aspects of its design and construction. The Highways Agency freely admits that, today, no new trunk road would be built to such poor safety standards. However, the bypass should not be compared with a new trunk road: it is more akin to an urban motorway. It is six lanes of fast-moving traffic, snaking through Chessington, Tolworth and New Malden, often at speeds well in excess of the 70 mph limit. That urban speedway has many dangerous features that would be considered totally unacceptable and unsafe on a new trunk road, let alone on a motorway.
The service roads at either side of the main carriageway are mostly two way, resulting in traffic passing near-side lane to near-side lane, with no safety fences in between, which is extremely disconcerting for drivers new to the road. As for the many entrances to and exits from that busy road, vehicles simply have insufficient room for adequate acceleration or deceleration into or out of the fast-moving A3 traffic. The road design and layout mean that often there are no proper slip roads. Even when there are slip roads on to the A3—such as that running from the Tolworth junction, by the Toby Jug pub-people experience real dangers when joining the A3. Several bus stops are still on the main carriageway—which would be unimaginable on a motorway and unthinkable on a new stretch of trunk road.
Undoubtedly, the most dangerous feature for local residents is the high speed of heavy traffic on a road with close proximity to unprotected footpaths and housing. Earlier this week, I met local residents and walked along both sides of the road. They told me how frequently accidents occur—once a week in some places. Cars leaving the carriageway and crossing a verge often end up crashing into parked cars, colliding with people's garden walls or smashing into people's houses. It is anyone's guess whether those accidents are all reported or appear in the Highways Agency's statistics, but I doubt that they do.
Local people told me how vehicles—cars and lorries alike—with no safety fences to stop them, often cross the near-side verge from the main carriageway on to service roads, simply to avoid queues. Unsurprisingly, such reckless queue jumping often results in accidents or in damage to parked vehicles. It can only be a matter of time before a pedestrian is killed, or even residents sitting in their lounge watching television are killed.
If the Minister doubts those dangers, I shall recount one relatively recent incident. On 18 January 1997, a Sainsbury's lorry left the main carriageway, crossed the service road and finally crashed into 210 Tolworth rise south. Before this debate, I gave the Minister a copy of a photograph of that dreadful incident. As the verge at that site is sloped and has absolutely no safety barrier, the vehicle left the carriageway and became airborne. It crashed into a house, but caused £135,000 in damage and destruction to two houses. Fortunately, no one was hurt. 
The accident was not the first time that vehicles have ploughed into 210 Tolworth rise south. The resident, Mr. Wouters, told me that his front wall had been knocked down three times. Another time, one Christmas morning, his porch was destroyed. One might ask why he continues to live there. Perhaps, because he served his country in the 6th Airborne, he is reluctant to retreat in the line of fire. However, he should not have to retreat. Mr. Wouters, his wife and their neighbours should have


protection—and at the earliest possible opportunity. There is an unanswerable case for safety barriers along that stretch of Tolworth rise south. Indeed, as I walked along the A3, I saw that protection was needed in many places, along Malden way, for example. What makes the problem even more bizarre is that safety barriers are installed in some places and special kerbing in others, yet for some unfathomable reason, a number of places have been left totally unprotected.
Local feeling is now running high, especially after the recent report from the Highways Agency, rejecting the case for safety barriers. Local residents, especially those from Tolworth rise and Malden way, are so upset that, led by a local young mother, Ms Julie Fisher, they have recently set up the SCAR campaign—stop cars, add railings. After years of inaction and excuses, it is clear that they have simply had enough. Having spoken to them and seen the excellent work of Councillor Rev. David Ward on the subject over the years, and having worked on the issue for some months, I can understand residents' frustration.
Let us start with the report. Even from its introduction, it is clear that it is flawed. It says that it will look at only those accidents involving personal injury. In other words, it ignores the many other accidents that happen almost daily. On that distorted logic, a safety fence can be fitted only when a few injuries and deaths have occurred. It is madness. I hope that the Minister has read the report and that she was as unimpressed as I was by its sometimes illogical and always unconvincing arguments.
In one part, the report notes that sections of carriageway without safety fences have lower accident rates than sections with safety fences. There is no real attempt to discuss that—just the implication that safety fences may contribute to more accidents. With such a finding, one might have expected the Highways Agency to recommend the removal of existing safety fences, yet it does not. Just to show how inconsistent and poor the report is, it goes on to destroy its own argument by admitting that existing safety fencing was, of course, erected in places where accidents were most likely to happen.
Ministers must not allow decisions to be taken on the basis of reports that, frankly, are even more substandard than the safety features on the A3.
The report's conclusion that there is no case for more safety fencing is odd, given some of the facts that it sets out. During its 36-month reference period, 341 personal injury accidents were recorded, of which 37 involved vehicles leaving the main carriageway on the near side. Of those, 16 were in areas with no safety fencing. However, of the 21 which occurred where safety fencing was in place, only three resulted in the safety fence being breached—in other words, the barriers work.
Given the number of accidents, the effectiveness of the barriers and the other advantages the barriers would bring—such as an end to the dangerous queue jumping via the service road—the case for more safety barriers is extremely strong. Yet the report and my meeting with the Highways Agency made it clear to me that those facts were not sufficient to convince the agency to invest in safety.
So I brought the case directly to the House and the Minister. The Minister may reply that the agency has a long list of competing demands and that there must be a system for prioritising budgets. I do not disagree, but

the current system is wrong. Surely it would be in line with other excellent Government initiatives—such as those on drink driving and the 20 mph speed limits—for the Minister to instruct the Highways Agency to consider the interests of the local community and not just the road user in its decisions.
Let me give the Minister another example of problems with the agency's current remit and approach. During my meeting with the Highways Agency, I questioned its representatives closely on the agency's priorities for retrospectively implementing modern safety standards to old trunk roads such as the A3 Kingston bypass. I was told that the agency's priorities did not include safety fences along the verge, so I questioned it about that. I was continually referred to the agency's guidelines, so I asked them to send me a copy. For the record, it was departmental standard TD 19/85 published in June 1985—a thrilling read. It makes it clear that, like the accident cluster analysis in the report, the guidelines for retrospectively fitting safety fences and barriers are fundamentally flawed. Section 4 of the document sets that out. It states:
Fences can be retrospectively fitted to verges in cases (a) to (f) set out below.
Let us look at (d). It refers to
obstructions including bridge piers or abutments, posts or large signs and sign gantry legs and trees.
Nowhere do the guidelines mention anything relating to pedestrian safety or the protection of property—with of course, the exception of the agency's own property. According to the guidelines, protecting subways is more important than protecting people's homes.
I hope that the Minister will assure me that she will review those guidelines as a matter of priority, as they cannot be right. In the context of the A3 Kingston bypass, they have resulted, and could continue to result, in substantial amounts of public money being spent on items that are not the top priority for safety for either local residents or the road user.
Councillors and residents have been given many excuses over the years for inaction on safety barriers. They have, for example, been told that the verge is not wide enough for barriers, yet it is wide enough to install barriers to protect gantries and subways. They have also been told that barriers would reduce visibility for drivers but, with sufficient signing, good design and a reduction in the speed limit, I do not believe that that would be the case. No one believes the excuses any longer.
I make no apology for being hard on the Highways Agency and its attitude to safety fences, but I want to be fair. I am delighted that, with the agency's help, we seem at long last to be making progress on the speed limit. I understand that it is highly likely that, later this year, the limit will be reduced to 50 mph. Anything that the Minister can do to ensure that the change is made would be heartily welcomed. If she can confirm today that the speed limit will be reduced, that would be excellent news.
The Minister will know that a reduction in the speed limit is no good unless it can be enforced. I have been told by the Hampton traffic unit that, with current resources, it would be stretched to enforce the limit, so we must also ensure that speed cameras are turned on, that they contain film, that the film is processed and checked and that there are more speed cameras. We must also ensure that it is


made visually clear to motorists that they are entering the reduced speed limit section—the signing must be clear and precise.
This issue is not going to go away. The previous Government failed abysmally to listen. I hope that the new Government will have fresh ears to hear, especially as this is the first time on the Floor of the House that the modern A3 Kingston bypass has been discussed and the views of those who live on the road properly represented.
I hope that the Minister will assure me that she will ensure that, when the speed limit is reduced and enforced, safety barriers will be installed. If she has any worries about the issue, I extend to her an open invitation from the local residents to visit the site at any time. She will be most welcome, and I am sure such a visit would convince her, as it did me, that urgent action needs to be taken on this matter. My constituents are looking to her for help.

The Minister for Transport in London (Ms Glenda Jackson): I congratulate the hon. Member for Kingston and Surbiton (Mr. Davey) not only on obtaining the debate but on having carried out so much research into issues that are, as he said, of particular concern to his constituents.
I welcome the opportunity to speak about the A3 Kingston bypass. I am aware that the hon. Gentleman has discussed a number of issues relating to the road with the Highways Agency. The road forms part of an important connection between the M25 and central London, as well as providing for local journeys. It is approximately 9.7 km long, consisting almost entirely of dual three-lane carriageway. It has, as the hon. Gentleman said, a speed limit of 70 mph and lane widths of 3 m.
I am pleased to inform the hon. Gentleman—I hope that he will be pleased to hear it—that the Highways Agency has commissioned a planned infrastructure investment study, which will comprise a major review of the maintenance and improvement works. The study will take a long-term look at the road, providing an outline programme for a 40-year period and a more detailed programme for upgrade and improvements that are required over the next four to five years. We believe that that will help to improve co-ordination of works, reduce the impact on road users and result in less disturbance to residents.
As the hon. Gentleman said, a number of issues affect the Kingston bypass. The Highways Agency has been actively involved in commissioning its consultant agent—Parkman Ltd.—and the London accident analysis unit to provide in-depth route and accident studies.
I am aware—indeed, the hon. Gentleman made it brilliantly clear—that he and his constituents are especially concerned about the provision of near-side safety fencing. I fully understand his wish to protect the occupiers of properties that front the bypass, especially those along the section at Tolworth rise south where, as he so graphically detailed, a heavy goods vehicle left the near-side carriageway on 18 January 1997.
Following that dreadful incident, it was decided that the Highways Agency should investigate the history of near-side accidents. The London accident analysis unit

was commissioned to carry out an analysis of accidents involving personal injury along the entire length of the A3 Kingston bypass from the A243 Hook road to the A308 Kingston vale. It used, as a basis, accident data collected over a three-year period ending November 1996. There were 341 personal injury accidents, of which 194 involved vehicles on the main carriageway. Of those, 37 involved a vehicle leaving the main carriageway on the near-side.
The analysis found no evidence of accident clusters, which, for a road such as the A3, are locations where there are three or more injury accidents within three years. The analysis found no such locations on the A3 verges. The study also found, as the hon. Gentleman pointed out, that those sections of the Kingston bypass with safety fencing had a higher incidence of vehicles running off the verge than did sections without verge safety fencing. However, that could be due to existing safety fencing having been erected where it was geographically most likely that vehicles would leave the main carriageway.
A comparison of personal injury accidents taken from the London accident analysis unit reports for 1994 and 1996 shows that the Kingston bypass has fewer personal injury accidents per kilometre than other trunk roads, borough roads and motorways within Greater London. For the A3 Kingston bypass, typical values are 12 accidents per kilometre. Elsewhere, the figure is nearer 16 accidents per kilometre.
A key target set by the Secretary of State for the Highways Agency is to contribute to reducing the number of accidents by the year 2000 by a third. One of the ways to achieve the target is to carry out safety schemes where the road environment is believed to contribute to the occurrence of accidents. The identification of suitable locations is not simple. The nature of accidents is such that it is not possible to predict where or when one will occur. Besides the isolated cases, it is known that accidents occur at sites of higher risk and those are identified by clusters of similar types of accidents. Therefore, the Highways Agency targets such sites.
Reliable data on personal injury accidents are available as a result of the legal requirement to report them. However, I recognise that a number of damage-only accidents will also have occurred. Indeed, residents and their representatives have brought those to the attention of the Highways Agency, for which I am grateful. As yet, there are no reliable records of those and, therefore, the nationally accepted practice is to use injury accidents to decide priorities between sites.
The criteria used by the Highways Agency for the provision and location of safety fencing are set down in departmental standard TD 19/85, "Safety Fences and Barriers", which is contained in volume 2, section 2 of the "Design Manual for Roads and Bridges". A copy of TD 19/85 is lodged in the House of Commons Library. The then Minister for Roads and Traffic made a statement to Parliament on 17 December 1986, which extended the provision of safety barriers to all dual carriageway trunk road central reserves where it could be shown that that was justified by the traffic using the road. That was to reduce the number of multiple-vehicle crossover incidents.
The "Safety Fences and Barriers" standard gives advice on the need to protect exceptional local hazards and it is for the designers to consider whether, in their professional experience, safety barriers should be provided. Safety barriers in themselves may present a hazard.
Verge accidents on the highway, unlike central reserve crossover accidents, usually involve one vehicle. Therefore, continuous-verge barriers are provided at sites of higher risk in accordance with departmental standard TD 19/85.
The policy of providing vehicle protection only at identified obstructions and hazards is well tested. However, it is under continuous review and is amended in the light of changing circumstances. The Highways Agency and the Transport Research Laboratory are examining accident data to evaluate the case for extending the provision of safety barriers at verges. Safety fencing on the verge should be provided where there are exceptional local hazards involving layout and roadside features. That includes obstructions closer than 4.5 m to the edge of the running carriageway on roads with speed limits above 50 mph. There is no requirement to protect obstructions, including buildings, beyond that point.
Safety fencing does not always provide the full solution. A safety fence would not have prevented the lorry from leaving the carriageway on 18 January 1997. Safety fences are designed and provided to contain vehicles of up to 1.5 tonnes. Evidence shows that a safety fence would have only a marginal effect on reducing the speed of errant heavy goods vehicles. In many locations on the verge, there is insufficient room to erect safety fencing that complies fully to TD 19/85. Where safety fencing is erected with less clearance than desirable there is an increased risk of accidents. For example, a car hitting a safety fence may be redirected back into a fast-moving traffic stream.
Another consideration is the effect that safety fencing can have on drivers' stopping sight distance, as the hon. Gentleman said. A safety fence can be an obstruction to a driver's line of vision approaching a bend and inhibit the ability to brake safely and stop before reaching an observed hazard. Other alternatives to protect near-side verges on the A3 such as higher kerbs are not viable. Research has shown that they are not suitable for high-speed roads such the Kingston bypass.
One positive proposal to come out of the London accident analysis unit's report was a recommendation for a review of the existing 70 mph speed limit on the A3 Kingston bypass. The Highways Agency has discussed the matter with the police, who are keen for the existing limit to be lowered to 50 mph. I trust that the hon. Gentleman will welcome that. Having completed an initial consultation with interested parties, the Highways Agency is proposing to publish draft orders on 20 March 1998 to reduce the speed limit to 50 mph. A statutory objection period of seven weeks will follow before the Highways Agency can make the necessary orders. If no objections are received, it will organise the erection of signing to implement the new speed limit. The works will include the installation of additional speed cameras,

requested by the police to enable the effective enforcement of the new speed limit. The hon. Gentleman said that that was particularly important. It is anticipated that implementation will be completed by summer 1998.
We believe that the measure will offer benefits to road users and local residents. Research has shown that reducing the speed limit can result in a reduction in the total number of accidents. That is an important principle in the Highways Agency's key objective of achieving a one-third reduction in the number of accidents by 2000.
I am aware that local residents and councillors have campaigned for a reduction in speed. A petition presented to the Government last year by local residents favoured a 50 mph speed limit. I trust that the residents will recognise that their concerns have been taken into account and something has been done. The Government have a duty to protect road users and residents. A 50 mph limit will strike a balance between the needs of both. Once the Highways Agency has completed the exercise, I shall ask it to monitor the situation and report back to me on the benefits obtained and make recommendations for any further measures.
There is also the problem of vehicles crossing the near-side verge at certain locations and using the service roads as a short cut when traffic on the A3 is delayed. The most notable example was on 18 December 1997, when a burst water main caused a long tailback and led to a driver intentionally crossing the near-side verge. The vehicle subsequently hit a car parked in the service road. The Highways Agency is aware of the situation, but, because of the specific circumstances and site constraints, it is having difficulty identifying a practical and safe solution. For example, raised kerbs and concrete bollards can create risks.
For other road users, such as motor cyclists, flexible knockdown bollards do not present a significant deterrent. The Highways Agency will therefore continue to monitor and consider the situation carefully. The service roads are part of the trunk road network, but are more akin to local roads in terms of problems faced by residents. The agency would like to reopen discussions with a view to transferring all service roads to local authorities. They could then be managed as local roads for the sole benefit of local residents.
Concern has also been raised, and was again tonight by the hon. Gentleman, about the safety of pedestrians, particularly schoolchildren. However, the majority of such journeys are made on footpaths not adjacent to the A3, and we therefore believe that the risks are low. The risk will inevitably be further reduced by the intended reduction in the speed limit. I will, however, ask the Highways Agency to identify any locations where large numbers of pedestrian movements occur on footways immediately adjacent to the A3 carriageways. It will also identify opportunities to implement schemes that encourage reduced dependence on car-borne journeys in support of its Toolkit initiative, which was launched by noble Friend the Minister for Roads on 22 January 1998.
In conclusion, it is clear that the reduction of speed on the A3 Kingston bypass will have an impact on the entire length of road in terms of reducing accidents. By monitoring the situation closely, the Highways Agency will be able to determine whether the speed limit reductions, combined with action to safeguard areas where exceptional hazards exist, will have the desired

effect. However, I realise that the hon. Gentleman will conclude that that does not go far enough. An open mind will therefore be kept on the issue of safety fencing following the introduction of the 50 mph speed limit, and I will—

The motion having been made after Ten o'clock, and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at twenty-nine minutes to Eleven o'clock.